U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





Form
      10-K





(Mark
      One)





|
                X
                |
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934







For
      the
      fiscal year ended: February 28, 2006





|__|
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934








Commission
      file number: *000-27225*







BDC
      Capital, Inc.


(Name
      of
      small business issuer in its charter)





Minnesota
            41-1427445(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)11974
                Portland Avenue, Burnsville, Minnesota
            55337(Address
                of principal executive offices)
            (Zip
                Code)Registrant's
                telephone number:(952)
                890-2362





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





Title
      of Each Class


Common
      Stock


Par
      Value
      $0.01 per share





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. [ 
]
      Yes    [X]
      No





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the
      Act. [  ]
      Yes    [X]
      No





Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the past 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days.


Yes
            X
            No




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














Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definitions of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check
      one):





Large
                Accelerated Filer [  ]
            Accelerated
                Filer [  ]
            Non-Accelerated
                Filer [X]





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




State
      the
      aggregate market value of the voting stock held by non-affiliates computed
      by
      reference to the price at which the stock was sold, or the average bid and
      asked
      prices of such stock, as of a specified date within the past 60 days:
      $12,827,164 based on shares held by non-affiliates as of April 28, 2006, and
      the
      closing sale price for said shares in the NASDAQ National Market as of such
      date.





There
      were 427,572,138 shares of the registrant’s common stock outstanding as of April
      28, 2006.





Title
      of Each Class


Preferred
      Stock, Par Value $0.01 per share




The
      Series A Preferred Stock (Series A Preferred) is non-interest bearing, does
      not
      have voting rights and is not entitled to receive dividends. Each share of
      Series A Preferred issued can be converted into common stock on a 1:1 basis
      after a twelve month period. Should a liquidation event occur, the Series A
      Preferred automatically converts into common stock based on the foregoing
      formula. Further, the Series A Preferred is not affected by forward or reverse
      splits on the Corporation's common stock or other adjustments to the
      Corporation's capital structure. Finally, Series A Preferred is entitled to
      elect a majority of the Corporation's board of directors at all times, provided
      that a majority of the board of directors is, at all times, independent.





The
      Corporation has currently 20,000,000 Series A Preferred issued and outstanding
      as of April 28, 2006.







DOCUMENTS
      INCORPORATED BY REFERENCE





There
      are
      incorporated by reference in this report on Form 10-KSB certain previously
      filed
      exhibits identified in Part III, Item 13 hereof.

















ii








TABLE
      OF
      CONTENTS




PART
                I
            1Item
                1.
            Business
            1Item
                1A.
            Risk
                Factors
            2Item
                2.
            Properties
            5Item
                3.
            Legal
                Proceedings
            5Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            5PART
                II
            6Item
                5.
            Market
                for the Registrant’s Common Equity and Related Stockholder Matters and
                Issuer Purchases of Equity Securities
            6Item
                6.
            Selected
                Financial Data
            7Item
                7.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            8Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            11Item
                8.
            Financial
                Statements and Supplementary Data
            12Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            12Item
                9A.
            Controls
                and Procedures
            12Item
                9B.
            Other
                Information
            12PART
                III
            13Item
                10.
            Directors
                and Executive Officers of the Registrant
            13Item
                11.
            Executive
                Compensation
            14Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            15Item
                13.
            Certain
                Relationships and Related Transactions
            16Item
                14.
            Principle
                Accountants and Fees and Services
            16PART
                IV
            18Item
                15.
            Exhibits,
                Financial Statement Schedules
            18SIGNATURES
            18








iii








PART
      I





ITEM
                1.
            BUSINESS





GENERAL





The
      Company was founded in 1982 under the laws of the State of Minnesota as Command
      Small Computer Learning Center, Inc., a computer training company. Over a period
      of years, the Company became involved in the sale of computer components and,
      eventually, became a value added reseller (VAR) of major computer brands. In
      1987, the Company changed its name to Command Electronics, Inc. In February
      1995, the Company acquired CyberStar Computer Systems, a manufacturer and
      marketer of microcomputers and servers, and in 1997 it changed its name to
      CyberStar Computer Corporation. In August of 2000, the Company changed its
      name
      to eNetpc, Inc. In December 2004, the Company elected to be regulated as a
      business development company under the Investment Company Act of 1940 and
      changed its name to BDC Capital Inc. Company headquarters are located at 11974
      Portland Avenue, Burnsville, MN 55337, and its telephone and facsimile numbers
      are (952) 890-2362 and (952) 890-7451, respectively. The Company's Internet
      addresses are www.bdccapital.com and www.bdcpartners.com.





BDC
      Capital, Inc. is now a company that intends to build an investment portfolio
      consisting of revenue generating assets and emerging companies well positioned
      for future growth. A business development company is a unique kind of investment
      company that primarily focuses on investing in or lending to small private
      companies and making managerial assistance available to them. A business
      development company may use capital provided by public stockholders and from
      other sources to invest in growing small businesses.





A
      business development company provides stockholders the ability to retain the
      liquidity of a publicly traded stock while sharing in the possible benefits
      of
      investing in privately owned small-and medium-sized companies.





BDC
      Capital, Inc. currently has one investment portfolio company, 100% wholly own
      BDC Partners, Inc. which has its website at www.bdcpartners.com.





BDC
      Partners, Inc. is a private company founded in 2004. Located in Minneapolis
      it
      is a wholly own subsidiary of BDC Capital, Inc ( www.bdccapital.com ).
      It has
      a unique, multidisciplinary technology process paired with an intellectual
      property revenue-focused business model. While most companies are in
      the business of technology products (including start-ups that design
      and manufacture products), BDC Partners owns pure intellectual property
      with recurring revenues, creating, funding and commercializing innovative new
      ideas.





Current
      Intellectual Property of BDC Partners, Inc.





PC
      Related domains:  BuildtoOrderPc series, including Laptopcomputers.com and
      Notebookcomputers.com.





GoSchools.com 
      domains: **S** pecializing
      in College, Universities (Division I, II and III, NAIA) and High School
      domain names.





Page
            1







EMPLOYEES





As
      of
      April 28, 2006, BDC Capital, Inc. has two employees. The Company’s employees are
      not represented by a union. The Company considers its relations with its
      employees to be outstanding.




ITEM
                1A.
            RISK
                FACTORS





We
      are
      subject to various risks that may materially harm our business, financial
      condition and results of operations. You should carefully consider the risks
      and
      uncertainties described below and the other information in this filing before
      deciding to purchase our common stock. If any of these risks or uncertainties
      actually occurs, our business, financial condition or operating results could
      be
      materially harmed. In that case, the trading price of our common stock could
      decline and you could lose all or part of your investment.





**RISKS
      RELATED TO OUR BUSINESS**





**We
      Have Historically Lost Money and Losses May Continue in the
      Future**





We
      have
      historically lost money. The loss for the twelve months ended February 28,
      2006
      was $1,059,421 and future losses are likely to occur. Accordingly, we may
      experience liquidity and cash flow problems if we are not able to raise
      additional capital as needed and on acceptable terms. No assurances can be
      given
      that we will be successful in reaching or maintaining profitable operations.
      Our
      current monthly operating expenses are $25,000 per month. Our current cash
      reserves after
      receiving payments of approximately $359,800 on subscription receivables
      subsequent to February 28, 2006 are
      sufficient to enable us to operate for the next 12 months.





**We
      May Need to Raise Additional Capital to Finance Operations**





Our
      operations have relied almost entirely on external financing to fund our
      operations. Such financing has historically come from a combination of
      borrowings and from the sale of common stock. We will need to raise additional
      capital to fund our anticipated operating expenses and future investments.
      Among
      other things, external financing will be required to cover our operating costs.
      We cannot assure you that financing whether from external sources or related
      parties will be available if needed or on favorable terms. The sale of our
      common stock to raise capital may cause dilution to our existing stockholders.
      Our inability to obtain adequate financing will result in the need to curtail
      business operations. Any of these events would be materially harmful to our
      business and may result in a lower stock price.





**Our
      Common Stock May Be Affected By Limited Trading Volume and May Fluctuate
      Significantly**





There
      has
      been a limited public market for our common stock and there can be no assurance
      that an active trading market for our common stock will develop. As a result,
      this could adversely affect our stockholders' ability to sell our common stock
      in short time periods, or possibly at all. Our common stock has experienced,
      and
      is likely to experience in the future, significant price and volume fluctuations
      that could adversely affect the market price of our common stock without regard
      to our operating performance. In addition, we believe that factors such as
      quarterly fluctuations in our financial results and changes in the overall
      economy or the condition of the financial markets could cause the price of
      our
      common stock to fluctuate substantially. Substantial fluctuations in our stock
      price could significantly reduce the price of our stock.





Page
            2







**Our
      Common Stock is Traded on the "Over-the-Counter Bulletin Board," Which May
      Make
      it More Difficult For Investors to Resell Their Shares Due to Suitability
      Requirements**





Our
      common stock is currently traded on the Over the Counter Bulletin Board (OTCBB)
      where we expect it to remain for the foreseeable future. Broker-dealers often
      decline to trade in OTCBB stocks given that the market for such securities
      is
      often limited, the stocks are more volatile, and the risks to investors are
      greater. These factors may reduce the potential market for our common stock
      by
      reducing the number of potential investors. This may make it more difficult
      for
      investors in our common stock to sell shares to third parties or to otherwise
      dispose of them. This could cause our stock price to decline.





**We
      Could Fail to Retain or Attract Key Personnel**





Our
      future success depends, in significant part, on the continued services of
      Richard Pomije, our Chief Executive Officer and Principal Financial Officer.
      We
      cannot assure you that we would be able to find an appropriate replacement
      for
      him or any other key personnel. Any loss or interruption of our key personnel's
      services could adversely affect our ability to develop our business plan. We
      do
      not have an employment agreement with Mr. Pomije, nor do we presently maintain
      key-man life insurance policies on him.





**Minnesota
      Law and Our Charter May Inhibit a Takeover of Our Company That Stockholders
      May
      Consider Favorable**





Provisions
      of Minnesota law, such as its business combination statute, may have the effect
      of delaying, deferring or preventing a change in control of our company. As
      a
      result, these provisions could limit the price some investors might be willing
      to pay in the future for shares of our common stock.





**Our
      Officers and Directors Have the Ability to Exercise Significant Influence Over
      Matters Submitted for Stockholder Approval and Their Interests May Differ From
      Other Stockholders**





Our
      executive officers and directors, in the aggregate, will have the ability to
      nominate two (2) members to the Board of Directors. Accordingly, our directors
      and executive officers, whether acting alone or together, may have significant
      influence in determining the outcome of any corporate transaction or other
      matter submitted to our Board for approval, including issuing common and
      preferred stock, and appointing officers, which could have a material impact
      on
      mergers, acquisitions, consolidations and the sale of all or substantially
      all
      of our assets, and also the power to prevent or cause a change in control.
      The
      interests of these board members may differ from the interests of the other
      stockholders.





**RISKS
      RELATED TO OUR OPERATION AS A**


**BUSINESS
      DEVELOPMENT COMPANY**





**We
      May Change Our Investment Policies Without Further Stockholder
      Approval**





Although
      we are limited by the Investment Company Act of 1940 with respect to the
      percentage of our assets that must be invested in qualified investment
      companies, we are not limited with respect to the minimum standard that any
      investment company must meet, nor the industries in which those investment
      companies must operate. We may make investments without stockholder approval
      and
      such investments may deviate significantly from our historic operations. Any
      change in our investment policy or selection of investments could adversely
      affect our stock price, liquidity, and the ability of our stockholders to sell
      their stock.





Page
            3






**Our
      Investments May Not Generate Sufficient Income to Cover Our
      Operations**





We
      intend
      to make investments into qualified companies that will provide the greatest
      overall return on our investment. However, certain of those investments may
      fail, in which case we will not receive any return on our investment. In
      addition, our investments may not generate income, either in the immediate
      future, or at all. As a result, we may have to sell additional stock, or borrow
      money, to cover our operating expenses. The effect of such actions could cause
      our stock price to decline or, if we are not successful in raising additional
      capital, we could cease to continue as a going concern.





**Investing
      in Private Companies Involves a High Degree of Risk**




Our
      portfolio consists of primarily long-term loans to and investments in private
      companies. Investments in private businesses involve a high degree of business
      and financial risk, which can result in substantial losses and accordingly
      should be considered speculative. There is generally no publicly available
      information about the companies in which we invest, and we rely significantly
      on
      the diligence of our employees and agents to obtain information in connection
      with our investment decisions. In addition, some smaller businesses have
      narrower product lines and market shares than their competition, and may be
      more
      vulnerable to customer preferences, market conditions or economic downturns,
      which may adversely affect the return on, or the recovery of, our investment
      in
      such businesses.


Specifically
      as it relates to our investment in BDC Partners, Inc. we rely on BDC Partners
      to
      timely renew its domain names which is its significant asset.





**Our
      Portfolio of Investments are Illiquid**




We
      generally acquire our investments directly from the issuer in privately
      negotiated transactions. The majority of the investments in our portfolio is
      typically subject to restrictions on resale or otherwise has no established
      trading market. We typically exit our investments when the portfolio company
      has
      a liquidity event such as a sale, recapitalization, or initial public offering
      of the company. The illiquidity of our investments may adversely affect our
      ability to dispose of debt and equity securities at times when it may be
      otherwise advantageous for us to liquidate such investments. In addition, if
      we
      were forced to immediately liquidate some or all of the investments in the
      portfolio, the proceeds of such liquidation would be significantly less than
      the
      current value of such investments. Substantially all of our portfolio
      investments are recorded at fair value as determined in good faith by our board
      of directors and, as a result, there is uncertainty regarding the value of
      our
      portfolio investments. Pursuant to the requirements of the 1940 Act, we value
      substantially all of our investments at fair value as determined in good faith
      by our board of directors on a quarterly basis. Since there is typically no
      readily ascertainable market value for the investments in our portfolio, our
      board of directors determines in good faith the fair value of these investments
      pursuant to a valuation policy and a consistently applied valuation
      process.




There
      is
      no single standard for determining fair value in good faith. As a result,
      determining fair value requires that judgment be applied to the specific facts
      and circumstances of each portfolio investment while employing a consistently
      applied valuation process for the types of investments we make. Unlike banks,
      we
      are not permitted to provide a general reserve for anticipated loan losses;
      we
      are instead required by the 1940 Act to specifically value each individual
      investment on a quarterly basis, and record unrealized depreciation for an
      investment that we believe has become impaired, including where collection
      of a
      loan or realization of an equity security is doubtful, or when the enterprise
      value of the company does not currently support the cost of our debt or equity
      investment. Conversely, we will record unrealized appreciation if we believe
      that the underlying portfolio company has appreciated in value and, therefore,
      our equity security has also appreciated in value. Without a readily
      ascertainable market value and because of the inherent uncertainty of valuation,
      the fair value of our investments determined in good faith by the board of
      directors may differ significantly from the values that would have been used
      had
      a ready market existed for the investments, and the differences could be
      material.








Page
            4








We
      will
      adjust quarterly the valuation of our portfolio to reflect the board of
      directors' determination of the fair value of each investment in our portfolio.
      Any changes in estimated fair value will be recorded in our statement of
      operations as "Net unrealized gains (losses)."





**Our
      Common Stock Price May be Volatile**





The
      trading price of our common stock may fluctuate substantially. The price of
      the
      common stock may be higher or lower than the price you pay for your shares,
      depending on many factors, some of which are beyond our control and may not
      be
      directly related to our operating performance. These factors include the
      following:




-
            Price
                and volume fluctuations in the overall stock market from time to
                time;


-
            Significant
                volatility in the market price and trading volume of securities of
                business development companies or other financial services
                companies;


-
            Volatility
                resulting from trading in derivative securities related to our common
                stock including puts, calls, long-term equity anticipation securities,
                or
                Leaps, or short trading positions;


-
            Changes
                in regulatory policies or tax guidelines with respect to business
                development companies or regulated investment
                companies;


-
            Actual
                or anticipated changes in our earnings or fluctuations in our operating
                results or changes in the expectations of securities
                analysts;


-
            General
                economic conditions and trends;


-
            Loss
                of a major funding source; or


-
            Departures
                of key personnel





ITEM
                2.
            PROPERTIES





BDC
      Capital, Inc. sub-leases from a director of the Company approximately 1,000
      square feet of space used for offices and operations equipment storage at 11974
      Portland Avenue, Burnsville, Minnesota at a monthly rent of $750 renewable
      monthly.





ITEM
                3.
            LEGAL
                PROCEEDINGS





The
      Company is exposed to asserted and unasserted claims encountered in the normal
      course of business. In the opinion of management, the resolution of these
      matters will not have a material adverse effect on the Company's financial
      position or results of operations.





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





None





Page
            5





PART
      II





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





BDC's
      common stock has been traded on the OTC Bulletin Board ("OTCBB") since June
      12,
      1998. The following table sets forth the quarterly high and low sales prices
      as
      reported by the Nasdaq National Market during the last two fiscal years ended
      February 28, 2006 and February 28, 2005.





Fiscal
                Year 2006
            
            Low
            
            HighFirst
                Quarter
            
            $
            0.16
            
            $
            0.17Second
                Quarter
            
            
            0.03
            
            
            0.03Third
                Quarter
            
            
            0.02
            
            
            0.02Fourth
                Quarter
            
            
            0.02
            
            
            0.04





Fiscal
                Year 2005
            
            Low
            
            HighFirst
                Quarter
            
            $
            0.10
            
            $
            0.55Second
                Quarter
            
            
            0.10
            
            
            0.10Third
                Quarter
            
            
            0.10
            
            
            0.55Fourth
                Quarter
            
            
            0.02
            
            
            0.28





These
      quotations represent inter dealer prices, without retail markup, markdown,
      or
      commission, and may not reflect actual transactions. As of April 28, 2006,
      there
      were approximately 360 record holders of the Company's common
      stock.





DIVIDEND
      POLICY





The
      Company has never paid cash dividends on any of its securities. The Company
      currently intends to retain any earnings for use in its operations and does
      not
      anticipate paying cash dividends in the foreseeable future. Future dividend
      policy will be determined by the Company's Board of Directors based upon the
      Company's earnings, if any, it's capital needs and other relevant
      factors.





Page
            6





ITEM
              6.
            SELECTED
                FINANCIAL DATA





The
      following table sets forth selected consolidated financial information for
      BDC
      Capital as of and for each of the two years in the period ended February 28,
      2006, and has been derived from our audited consolidated financial statements.







**As
                a Business Development Company**
              **Statement
                of Operations Data**
            
            **For
                the year ended****February
                28, 2006**
            
            **For
                the three months ended****February
                28, 2005**Investment
                income
            
            $
            823
            
            $
            -Operating
                expenses
            
            
            1,060,244
            
            
            217,353Net
                investment loss
            
            
            (1,059,421
            )
            
            (217,353
            )Net
                change in unrealized appreciation on investment
            
            
            -
            
            
            607,597Net
                increase (decrease) in net assets resulting from operation
            
            $
            (1,059,421
            )
            $
            390,244Income
                (loss) per common share-basic
            
            $
            (0.01
            )
            $
            0.07Income
                (loss) per common share-diluted
            
            $
            (0.01
            )
            $
            0.01Weighted
                average shares outstanding-basic
            
            
            96,866,690
            
            
            5,222,212Weighted
                average shares outstanding-diluted
            
            
            96,866,690
            
            
            35,661,227







**Prior
                to becoming a Business Development Company**
              **Statement
                of Operations Data**
            
            **For
                the nine months ended**
              **November
                30, 2004**Revenues
            
            $
            111,409Cost
                of sales
            
            
            76,997Gross
                profit
            
            
            34,412Selling,
                general and administrative expenses
            
            
            182,486Loss
                from operations
            
            
            (148,074
            )Interest
                expense
            
            
            (23,632
            )Net
                loss
            
            $
            (171,706
            )Loss
                per common share-basic and diluted
            
            $
            (.04
            )Weighted
                average shares outstanding-basic and diluted
            
            
            3,939,000







**Balance
                Sheet Data**
            
            **2006**
            
            **2005**Total
                Assets
            
            $
            1,031,265
            
            $
            935,179Total
                Liabilities
            
            
            79,504
            
            
            127,143Stockholders’
                Equity
            
            
            951,761
            
            
            808,036





The
      data
      set forth below should be read in conjunction with “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations” and our Consolidated
      Financial Statements and related notes.





Page
            7








ITEM
                7.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS





The
      following is a discussion of the financial condition and results of operations
      of the Company for the year ended February 28, 2006 and for the year ended
      February 28, 2005, which should be read in conjunction with, and is qualified
      in
      its entirety by, the financial statements and notes thereto included elsewhere
      in this report.





The
      results of operations for 2005 are divided into two periods. The nine-month
      period, representing the period March 1, 2004 through November 30, 2004,
      reflects the Company's results prior to operating as a business development
      company under the Investment Company Act of 1940, as amended. The three-month
      period ended February 28, 2005, reflects the Company's results as a business
      development company under the Investment Company Act of 1940, as amended.
      Accounting principles used in the preparation of the financial statements
      beginning December 1, 2004 are different than those of prior periods and,
      therefore, the financial position and results of operations of these periods
      are
      not directly comparable. The primary differences in accounting principles relate
      to the carrying value of investments and consolidations.





Changes
      in unrealized gains (losses) on the change in value of portfolio investments
      for
      business development companies are recognized each period. Prior to becoming
      a
      business development company, unrealized gains (losses) on the change in value
      of investments were recorded as accumulated comprehensive income in the
      statement of stockholders equity. Gains (losses) on investment would only be
      recognized when realized or when an investment was permanently
      impaired.





As
      a
      business development company, consolidation of portfolio companies is not
      required in which the Company has a controlling interest. In contrast, prior
      to
      operating as a business development corporation, entities in which the Company
      had a controlling interest would have been required to be
      consolidated.




RESULTS
      OF OPERATIONS





YEARS
      ENDED FEBRUARY 28, 2006 AND FEBRUARY 28, 2005





The
      results of operations for fiscal year 2005 are divided into two periods. The
      nine-month period, representing the period March 1, 2004 through November 30,
      2004 reflects the Company’s results prior to operating as a business development
      company under the Investment Company Act of 1940. The three-month period ended
      February 28, 2005 reflects the Company’s results as a business development
      company under the Investment Company Act of 1940. The year ended February 28,
      2006 is a complete year as a business development company.





For
      the
      year ended February 28, 2006, the Company incurred a net investment loss of
      $1,059,421. The main components of this loss related to $79,790 of professional
      fees with a majority of these fees relating to accounting and investor relations
      and $809,888 for interest expense on convertible debt. On the interest expense,
      $775,906 relates to the amortization of original debt discount which originated
      from the beneficial conversion feature related to the debt. In addition, the
      Company recorded administrative expenses of $147,816 for the management of
      the
      company.





Page
            8








For
      the
      three months ended February 28, 2005, the Company incurred a net investment
      loss
      of $217,353. The main components of this loss related to $69,901 of professional
      fees with a majority of these fees relating to setting up the Company as a
      business development company and $139,171 for interest expense on convertible
      debt. On the interest expense, $132,757 relates to the amortization of original
      debt discount which originated from the beneficial conversion feature related
      to
      the debt. In addition, the Company recorded an increase in unrealized
      appreciation on its investment in BDC Partners, Inc. of $607,597.





For
      the
      nine months ended November 30, 2004, the Company incurred a loss from operations
      of $148,074, compared to a loss of $136,707 for the year ended February 28,
      2004. The change in the net loss in 2005 is primarily attributable to the
      continued decline in revenues from the computer sales division. The net assets
      and operations of the computer sales division was transferred to the BDC
      Partners, Inc. when the Company became a business development
      company.





LIQUIDITY
      AND CAPITAL RESOURCES





***As
      a business development company***





BDC
      Capital, Inc.’s cash position at February 28, 2006 was $15,346 , a decrease of
      $244,833 from $260,179 at February 28, 2005. During the year ended February
      28,
      2006, net cash used in operating activities was $507,628. Net cash provided
      by
      financing activities of $262,795 for the year ended February 28, 2006 consisted
      primarily of issuance of common and preferred stock and convertible debentures
      net of payments on convertible debt.





BDC
      Capital, Inc.’s cash position at February 28, 2005 was $260,179, an increase of
      $243,846 from $16,333 at November 30, 2004. During the three months ended
      February 28, 2005, net cash used in operating activities was $146,154. Net
      cash
      provided by financing activities of $390,000 for the three months ended February
      28, 2005 consisted entirely of issuance of convertible debentures during the
      three month period.





Our
      current monthly operating expenses are approximately $25,000 per month. Our
      current cash reserves after receiving payments of approximately $359,800 on
      subscription receivables subsequent to February 28, 2006 are sufficient to
      enable us to operate for the next 12 months. We anticipate that any additional
      financing would be through the sales of our common stock or other equity-based
      securities. We do have in place a $16.5 million equity line from new and
      existing investors. BDC Capital, Inc. signed agreements for the equity line
      in
      February 2005. Under the terms of the agreement, BDC Capital may elect to
      receive as much as $16.5 million from the investors in common stock purchases
      over the next two years.





***Prior
      to becoming a business development company***





BDC
      Capital, Inc.’s cash position at November 30, 2004 was $16,333, an increase of
      $6,650 from $9,683 at February 28, 2004. During the nine months ended November
      30, 2004, net cash used by operating activities was $113,873. Net cash provided
      by financing activities was $120,523 for the nine months ended November 30,
      2004.





**Recent
      Developments — Portfolio Companies**





None.





Page
            9








**Critical
      Accounting Policies**





Critical
      accounting policies are those that are both important to the presentation of
      our
      financial condition and results of operations and those that require
      management’s most difficult, complex or subjective judgments. Our critical
      accounting policies are those applicable to the valuation of investments.





**Valuation
      of Portfolio Investments**





As
      a
      business development company, we invest primarily in illiquid securities
      including debt and equity securities of private companies. The investments
      are
      generally subject to restrictions on resale and generally have no established
      trading market. We value substantially all of our equity investments at fair
      value as determined in good faith by our valuation committee on a quarterly
      basis. The valuation committee, comprised of two board members, reviews and
      approves the valuation of our investments within the guidelines established
      by
      the board of directors. Fair value is generally defined as the amount that
      an
      investment could be sold for in an orderly disposition over a reasonable time.
      Generally, to increase objectivity in valuing our assets, external measures
      of
      value, such as public markets or third party transactions, are utilized whenever
      possible. Valuation is not based on long term work-out value, nor immediate
      liquidation value, nor incremental value for potential changes that may take
      place in the future.





***Recently
      issued accounting pronouncements:***




In
      December 2004, the Financial Accounting Standards Board ("FASB") issued
      Statement No. 123(R), "Shared-Based Payment," which is a revision of SFAS No.
      123, and supersedes APB Opinion No. 25. SFAS 12(R) requires all share-based
      payments to employees and directors, as well as other equity-based compensation
      arrangements, to be recognized in the financial statements based on their fair
      values, using prescribed option-pricing models effective for the first annual
      period beginning after June 15, 2005. The pro forma disclosure previously
      permitted under SFAS No. 123 will no longer be an alternative to financial
      statements recognition. The adoption of this statement becomes effective for
      the
      Company on March 1, 2006.






The
      impact of adopting Statement No. 123(R) can not be predicted at this time
      because it will depend on levels of share-based payments granted in the future,
      valuation methodology adopted and assumptions selected at the time of future
      grants. With the adoption of Statement No. 123(R), we may elect to utilize
      a
      different valuation method and/or different valuation assumptions. These
      selections may have a significant impact on the amount of share based payment
      expense under Statement No. 123(R).






In
      May
      2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections"
      which
      replaces APB Opinion No. 20 "Accounting Changes" and SFAS No. 3, "Reporting
      Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion
      No. 28." SFAS 154 provides guidance on the accounting for and reporting of
      accounting changes and error corrections. It establishes retrospective
      application, or the latest practicable date, as the required method for
      reporting a change in accounting principle and the reporting of a correction
      of
      an error. SFAS 154 is effective for accounting changes and corrections of errors
      made in fiscal years beginning after December 15, 2005. We are currently
      evaluating the effect that the adoption of SFAS 154 will have on our results
      of
      operations and financial condition but do not expect that adoption will have
      a
      material impact.







Page
            10







FORWARD-LOOKING
      INFORMATION







Any
      statements contained herein related to future events are forward-looking
      statements and are made pursuant to the safe harbor provisions of the Private
      Securities Litigation Reform Act of 1995. Readers are cautioned not to place
      undue reliance on forward-looking statements. BDC Capital, Inc. undertakes
      no
      obligation to update any such statements to reflect actual events.





ITEM
                7A.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK.





The
      Company’s investment activities contain elements of risk. The portion of the
      Company’s investment portfolio consisting of equity or equity-linked debt
      securities in private companies is subject to valuation risk. Because there
      is
      typically no public market for the equity and equity-linked debt securities
      in
      which it invests, the valuation of the equity interest in the portfolio is
      stated at “fair value” and determined in good faith by the Board of Directors on
      a quarterly basis in accordance with the Company’s investment valuation
      policy.


In
      the
      absence of a readily ascertainable market value, the estimated value of the
      Company’s portfolio may differ significantly from the value that would be placed
      on the portfolio if a ready market for the investments existed. Any changes
      in
      valuation are recorded in the Company’s consolidated statement of operations as
“Net unrealized appreciation (depreciation) on investment”.





At
      times
      a portion of the Company’s portfolio may include marketable securities traded in
      the over-the-counter market. In addition, there may be a portion of the
      Company’s portfolio for which no regular trading market exists. In order to
      realize the full value of a security, the market must trade in an orderly
      fashion or a willing purchaser must be available when a sale is to be made.
      Should an economic or other event occur that would not allow the markets to
      trade in an orderly fashion the Company may not be able to realize the fair
      value of its marketable investments or other investments in a timely
      manner.





As
      of
      February 28, 2006, the Company did not have any off-balance sheet investments
      or
      hedging investments.





*Impact
      of Inflation*





The
      Company does not believe that its business is materially affected by inflation,
      other than the impact inflation may have on the securities markets, the
      valuations of business enterprises and the relationship of such valuation to
      underlying earnings, all of which will influence the value of the Company’s
      investments.




















Page
            11





ITEM
                8.
            FINANCIAL
                STATEMENTS AND SUPPLEMENTAL DATA





PageReport
                of Independent Registered Public Accounting Firm
            20Financial
                Statements:Balance
                Sheets
            21Statements
                of Operations
            22-23Statements
                of Stockholders' Equity (Deficit)
            24Statements
                of Cash Flows
            25Notes
                to Financial Statements
            26-35





ITEM
                9.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE





None.





ITEM
                9A.
            CONTROLS
                AND PROCEDURES





(a)
      Evaluation of Disclosure Controls and Procedures.





An
      evaluation made at the end of the period covered by this report was performed
      under the supervision and with the participation of the Company's president,
      chief executive officer ("CEO") and the chief financial officer ("CFO") of
      the
      effectiveness of the design and operation of the Company's disclosure controls
      and procedures to insure that the Company records, processes, summarizes and
      reports in a timely and effective manner the information required to be
      disclosed in reports filed with or submitted to the Securities and Exchange
      Commission. Based on that evaluation, the Company's management, including the
      CEO and CFO, concluded that the Company's disclosure controls and procedures
      were effective in timely bringing to their attention material information
      related to the Company required to be included in the Company's periodic
      Securities and Exchange Commission filings. Since the date of this evaluation,
      there have been no significant changes in the Company's internal controls or
      in
      other factors that could significantly affect those controls.





However,
      due to the limited number of Company employees engaged in the authorization,
      recording, processing and reporting of transactions, there is inherently a
      lack
      of segregation of duties. The Company periodically assesses the cost versus
      benefit of adding the resources that would remedy or mitigate this situation,
      and currently does not consider the benefits to outweigh the costs of adding
      additional staff in light of the limited number of transactions related to
      the
      Company's operations.





(b)
      Changes in Internal Controls Over Financial Reporting.





There
      have been no significant changes in internal control over financial reporting
      that occurred during the fiscal period covered by this report that have
      materially affected or are reasonably likely to materially affect the Company’s
      internal control over financial reporting.





ITEM
                9B.
            OTHER
                INFORMATION





None.





Page
            12





PART
      III





ITEM
                10.
            DIRECTORS
                AND EXECUTIVE OFFICERS OF THE
                REGISTRANT





Set
      forth
      below is certain information concerning each of the directors and executive
      officers of BDC Capital, Inc.





Name
            Age
            
            PositionRichard
                A. Pomije
            50
            
            Chairman,
                President, CEO & Secretary/TreasurerJeff
                Mills
            44
            
            DirectorDan
                Janisch
            58
            
            Director





RICHARD
      A. POMIJE has been with eNetpc and BDC since 1982 and has served as President,
      Secretary, Treasurer, and a director since 1996. He had previously served in
      such positions from 1983 through 1992. Mr. Pomije's primary responsibilities
      include overall strategic planning. Mr. Pomije holds a degree in Communication
      Technology, Audio Technology and Technical Services from Brown Institute. Mr.
      Pomije also received a First Class FCC license with radar
      endorsement.





JEFF
      MILLS became a director in December 2003. Mr. Mills has worked for Xerox
      Corporation for the past 17 years in various operation and sales positions.
      He
      has also served as director for one private company and has served as president,
      owner and operator of various business ventures. Mr. Mills is a 1984 graduate
      of
      the University of Northern Iowa and has held several security
      licenses.





DAN
      JANISCH became a director in March 2005. Mr. Janisch is President and CEO of
      Black Diamond Capital, a private equity firm based in Minneapolis, Minnesota.
      He
      has more than 30 years of experience in business strategy development and
      operational execution in a wide range of industries, including manufacturing,
      technology, telecommunications, professional service, distribution and
      healthcare ranging from privately held emerging firms to Fortune 500 Companies.
      He has led the start-up and sale of two companies, and held corporate and or
      operational positions with Holiday Inns International, Honeywell Inc., and
      Cray
      Research. As president of Black Diamond Capital, Janisch is responsible for
      raising capital, due diligence, strategic acquisitions and operational oversight
      of portfolio companies. Prior to Black Diamond he was Vice President, Strategic
      Advisory & Turnaround group, one of the top five turnaround firms in the
      U.S.





Directors
      are elected at the annual meeting of the stockholders and serve until their
      successors are elected and qualified. Officers are elected by the Board of
      Directors and serve at the discretion of the Board of Directors or until their
      earlier resignation or removal.








Page
            13






Section
      16 Beneficial Ownership Reporting Compliance





Section
      16 of the Securities Exchange Act of 1934, as amended, and the rules promulgated
      there under require the Company's officers, directors, and holders of 10% or
      more of its outstanding common stock to file certain reports with the Securities
      and Exchange Commission (the "Commission"). To the company's best knowledge,
      based solely on information provided by the reporting individuals, all of the
      reports required to be filed by these individuals were filed.





Audit
      Committee





Mills
      and
      Janisch currently serve as members of the Audit Committee. This committee met
      twice during the last fiscal year. The Audit Committee is responsible for
      assisting the Board of Directors with respect to its oversight of corporate
      accounting, reporting practices of the Company and the quality and integrity
      of
      the financial reports of the Company. The Board has named Jeff Mills as the
      "audit committee financial expert" as defined by Item 401(h)(2) of Regulation
      S-K under the Securities Act of 1933. The Company acknowledges that the
      designation of Mr. Mills as the audit committee financial expert does not impose
      on Mr. Mills any duties, obligations or liability that are greater than the
      duties, obligations and liability imposed on Mr. Mills as a member of the Audit
      Committee and the Board of Directors in the absence of such designation or
      identification.





ITEM
                11.
            EXECUTIVE
                COMPENSATION





The
      following table sets forth the compensation paid for services rendered during
      the fiscal years ended February 28, 2006, February 28, 2005, and February 28,
      2004 to the Chairman and Chief Executive Officer. No other officers earned
      cash
      compensation in excess of $100,000 in fiscal 2006.








**Summary
      Compensation Table**


Name
                  and Principal Position
              
              Fiscal
                  Year
              
              Salary
              
              Other
                  Annual CompensationRichard
                  A. Pomije, Chairman and CEO
              
              
              2006
              
              $
              125,325
              
              $
              5,000
              (2)2005
              
              $
              96,650
              
              $
              500
              (2)2004
              
              $
              5,643
              
              $
              14,815
              (1)




(1)
            Automobile
                expenses.


(2)
            Board
                member fees





**OPTION
      GRANTS IN THE LAST FISCAL YEAR**





The
      following table sets forth information regarding options granted to the Named
      Executive Officer during the 2006 and 2005 fiscal year.





No
      options were granted in fiscal 2006 and 2005.








Page
            14





**AGGREGATED
      OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
      VALUES**





The
      following table provides information relating to the value of shares of common
      stock subject to options held by the Named Executive Officer as of February
      28, 2006 **.**





**Name**
            **Number
                of shares -**
              **Underlying
                options granted**
            **Exercise
                Price**
              **($/share)**
            **Expiration
                date**Richard
                A. Pomije
            200,000
            $1.00
            ------Jeff
                Mills
            200,000
            $1.00
            ------





(1)
      expiration is 30 days after service terminates.





**DIRECTORS'
      COMPENSATION**


To
      date,
      BDC Capital, Inc. currently pays it's directors a $500.00 monthly
      fee.





ITEM
                12.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS





The
      following table sets forth certain information as of February
      28, 2006 with
      respect to the number of shares of Common Stock beneficially owned by (i) each
      person known by BDC Capital to own beneficially 10% or more of the Common Stock;
      (ii) each director; (iii) the Chief Executive Officer, and (iv) all directors
      and executive officers as a group. Unless otherwise noted, each person listed
      below has sole voting and investment power with respect to his shares. The
      address for each individual set forth below is 11974 Portland, Burnsville,
      MN
      55337.




Name
                of Beneficial Owner (1)
            Number
                of shares
            Percentage
                of Outstanding SharesRichard
                A. Pomije
            3,069,918(2)
            .07%Jeff
                Mills
            300,000(3)
            .01%All
                directors and executive officers as a group
            3,369,918
            .08%





Common
      shares issued and outstanding as of 2/28/2006 were 427,572,138





Page
            15





(1)
      The
      securities "beneficially owned" by a person are determined in accordance with
      the definition of "beneficial ownership" set forth in the regulations of the
      Commission and, accordingly, may include securities owned by or for, among
      others, the spouse, children or certain other relatives of such person as well
      as other securities as to which the person has or shares voting or investment
      power or has the right to acquire within 60 days.





(2)
      excludes 200,000 shares of Common Stock purchasable pursuant to the exercise
      of
      currently exercisable options.





(3)
      excludes 200,000 shares of Common Stock purchasable pursuant to the exercise
      of
      currently exercisable options.








ITEM
                13.
            CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS





BDC
      Capital, Inc. sub-leases from a director of the Company approximately 1,000
      square feet of space used for offices and operations equipment storage at 11974
      Portland Avenue, Burnsville, Minnesota at a monthly rent of $750 renewable
      monthly.





ITEM
                14.
            Principal
                Accountant Fees and Services.





During
      the prior two fiscal years, the following was paid for accountant and related
      services:





2006
            
            2005Audit
                fees (1)
            
            $
            24,510
            
            $
            14,758Tax
                fees (2)
            
            
            -
            
            
            2,570All
                other fees
            
            
            -
            
            
            -





(1)
      audit
      fees were paid to CMO during the year ended February 28, 2006 and to VK during
      the year ended February 28, 2005


(2)
      tax
      fees paid to Century Small Business Solutions





*Audit
      Committee Policies and Procedures* ***:***





The
      primary responsibility of the Audit Committee is to oversee the Company’s
      financial reporting process on behalf of the Board and report the results of
      their activities to the Board. Management is responsible for preparing the
      Company’s financial statements, and the independent auditors are responsible for
      auditing those financial statements. The Committee in carrying out its
      responsibilities believes its policies and procedures should remain flexible
      in
      order to best react to changing conditions and circumstances.





The
      following shall be the principal recurring processes of the Audit Committee
      in
      carrying out its oversight responsibilities. The processes are set forth as
      a
      guide with the understanding that the Committee may supplement them as
      appropriate.





Page
            16





·
            The
                Committee shall have a clear understanding with management and the
                independent auditors that the independent auditors are ultimately
                accountable to the board and the Audit Committee, as representatives
                of
                the Company’s stockholders. The Committee shall have the ultimate
                authority for and responsibility to evaluate and annually recommend
                the
                selection, retention, and, where appropriate, the replacement of
                the
                independent auditors. The Committee shall review and approve the
                performance by the independent auditors of any non-audit-related
                service
                if the fees for such service are projected to exceed 15% of the most
                recently completed fiscal year’s combined audit fees and audit-related
                service fees. The Committee shall review and discuss with the auditors
                their independence from management and the Company and the matters
                included in the written disclosures required by professional independence
                standards applicable to the independent auditors. Annually, the Committee
                shall review and assess whether the independent auditor’s performance of
                non-audit services is compatible with the auditor’s independence. In
                addition, the Audit Committee shall review any candidate for the
                senior
                accounting and/or financial executive position prior to his or her
                appointment by the Company.





·
            The
                Committee shall review and discuss with the independent auditors
                and with
                the head of the Company’s finance department the overall scope and plans
                for the audits. Also, the Committee shall discuss with management
                and the
                independent auditors the adequacy and effectiveness of the accounting
                and
                financial controls, including the Company’s system to monitor and manage
                business risk, and legal and ethical compliance programs. Further,
                the
                Committee shall meet separately with the independent auditors, without
                management present, to discuss the results of their respective audit
                procedures.





·
            The
                Committee shall review and discuss the results of the quarterly review
                and
                any other matters required to be communicated to the committee by
                the
                independent auditors under generally accepted auditing standards.
                The
                chair of the Committee may represent the entire Committee for the
                purpose
                of this review.





·
            The
                Committee shall review and discuss with management and the independent
                auditors the financial statements to be included in the Company’s annual
                report on Form 10-K, including their judgment about the quality,
                not just
                the acceptability, of accounting principles, the reasonableness of
                significant judgments, the basis and appropriateness of any change
                in
                significant accounting policies and the clarity of the disclosures
                in the
                financial statements. Also, the Committee shall review and discuss
                the
                results of the annual audit and any other matters required to be
                communicated to the Committee by the independent auditors under generally
                accepted auditing standards.





·
            The
                Committee shall review and discuss with management and the independent
                auditors any material financial or non-financial arrangements of
                the
                Company which do not appear on the financial statements of the Company
                and
                any transactions or courses of dealing with parties related to the
                Company
                which transactions are significant in size or involve terms or other
                aspects that differ from those that would likely be negotiated with
                independent parties, in each case where such arrangements or transactions
                are relevant to an understanding of the Company’s financial
                statements.








Page
            17








**PART
      IV**





**ITEM
                15.**
            **EXHIBITS,
                FINANCIAL STATEMENT
                SCHEDULES**





(a)
              Financial
                  Statements


Audited
      Financial Statements for the year ended February 28, 2006





(b)
              Exhibits.


3.1
            Articles
                of Incorporation, as amended (1)


3.2
            Bylaws
                (1)


10.2
            1996
                Employee Stock Option Plan, as amended to date
                (1)


31
            Certifications
                of Chief Executive Officer and Chief Financial Officer under Rule
                13a-14(a)/15d-14(a)


32
            Certifications
                under Section 1350





(1)
      Incorporated by reference to exhibit filed as a part of Registration Statement
      on Form 10-SB (Commission File No. 000-27225).





SIGNATURES




Pursuant
      to the requirements of Section13 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.











BDC
                CAPITAL, INC.Dated:
                May 19, 2006
            By:/s/
                Richard A.
                PomijeRichard
                A. Pomije, Chief Executive Officer(Principal
                executive officer)








Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Company and in the
      capacities and on the dates indicated.








Dated:
                May 19, 2006
            By:/s/
                Richard A.
                PomijeRichard
                A. Pomije, Director, Chief Executive Officer,
              Chief
                Financial Officer and President (Principal executive
                officer)Dated:
                May 19, 2006
            By:/s/
                Dan
                JanischDan
                Janisch, DirectorDated:
                May 19, 2006
            By:/s/
                Jeff
                MillsJeff
                Mills, Director









Page
            18



































**BDC
      Capital, Inc.**








**FINANCIAL
      REPORT**





**FEBRUARY
      28, 2006 AND 2005**









































Page
            19








**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**







To
      the
      Board of Directors and Stockholders


BDC
      Capital, Inc.





We
      have
      audited the accompanying balance sheets of BDC Capital, Inc. as of February
      28,
      2006 and 2005, including the schedule of investments and the related statements
      of operations, stockholders' equity and cash flows for the year ended February
      28, 2006, the three months ended February 28, 2005 and the nine months ended
      November 30, 2004. These financial statements are the responsibility of the
      Company's management. Our responsibility is to express an opinion on these
      financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Accounting
      Oversight Board (United States). Those standards require that we plan and
      perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit 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 audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of BDC Capital, Inc. as of February
      28, 2006 and 2005, and the results of its operations and its cash flows for
      the
      year ended February 28, 2006, the three months ended February 28, 2005 and
      the
      nine months ended November 30, 2004, in conformity with accounting principles
      generally accepted in the United States of America.








/s/
      Carver Moquist & O’Connor, LLC





Bloomington,
      Minnesota


May
      17,
      2006








Page
          20








BDC
      Capital, Inc.


BALANCE
      SHEETS


February
      28, 2006 and 2005





**ASSETS**2006
            
            2005Current
                assets:Cash
            
            $
            15,346
            
            $
            260,179Prepaid
                expense
            
            
            2,019
            
            
            -Total
                current assets
            
            
            17,365
            
            
            260,179Property
                and equipment, net
            
            
            -
            
            
            -Investment
                in securities, at fair value (cost of $406,303 and $67,403 at February
                28,
                2006 and 2005, respectively)
            
            
            1,013,900
            
            
            675,000Total
                assets
            
            $
            1,031,265
            
            $
            935,179**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            4,420
            
            $
            -Related
                party convertible debentures, net of original issue discount of $166,874
                in 2005
            
            
            -
            
            
            18,675Convertible
                debentures, net of original issue discount of $269,032 in
                2005
            
            
            -
            
            
            99,330Advance
                from stockholder
            
            
            798Accrued
                liabilities
            
            
            3,876
            
            
            7,038Due
                to BDC Partners, Inc.
            
            
            410
            
            
            2,100Total
                current liabilities
            
            
            9,504
            
            
            127,143Notes
                payable - related party
            
            
            70,000
            
            
            -Total
                liabilities
            
            
            79,504
            
            
            127,143Commitments
                and contingenciesStockholders’
                equity:Preferred
                stock, $.01 par value, 20,000,000 shares authorized, 20,000,000 and
                3,939,000 issued and outstanding, respectively
            
            
            200,000
            
            
            39,390Common
                stock, $.01 par value, 2,000,000,000 shares authorized, 427,572,138
                and
                6,980,117 shares issued and outstanding, respectively
            
            
            4,275,721
            
            
            69,801Additional
                paid-in-capital
            
            
            5,149,389
            
            
            4,762,773Subscription
                receivable
            
            
            (3,550,000
            )
            
            -Accumulated
                deficit
            
            
            (5,123,349
            )
            
            (4,063,928
            )Total
                stockholders’ equity
            
            
            951,761
            
            
            808,036Total
                liabilities and stockholders’ equity
            
            $
            1,031,265
            
            $
            935,179





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








Page
            21






BDC
      Capital, Inc.


STATEMENT
      OF OPERATIONS





As
                a Business
              Development
                CompanyYear
                Ended February 28,
              2006
            
            Three
                Months
              Ended
              February
                28,
              2005Investment
                income
            
            $
            823
            
            $
            -Operating
                Expenses:Professional
                fees
            
            
            79,790
            
            
            69,901Administrative
                expenses
            
            
            147,816
            
            
            6,885Rent
            
            
            4,500
            
            
            750Other
            
            
            18,250
            
            
            646Interest
                expense
            
            
            809,888
            
            
            139,171Total
                Operating expenses
            
            
            1,060,244
            
            
            217,353Net
                investment loss
            
            
            (1,059,421
            )
            
            (217,353
            )Net
                change in unrealized appreciation on investment
            
            
            -
            
            
            607,597Net
                increase (decrease) in net assets resulting from
                operations
            
            $
            (1,059,421
            )
            $
            390,244Income
                (loss) per common share - basic
            
            $
            (0.01
            )
            $
            0.07Income
                (loss) per common share -diluted
            
            $
            (0.01
            )
            $
            0.01Weighted
                average shares outstanding - basic
            
            
            96,866,690
            
            
            5,222,212Weighted
                average shares outstanding - diluted
            
            
            96,866,690
            
            
            35,661,227




















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





Page
            22





BDC
      Capital, Inc.


STATEMENTS
      OF OPERATIONS





Prior
                to becoming a
              Business
              Development
              CompanyNine
                months ended
              November
                30, 2004Revenues
            
            $
            111,409Cost
                of sales
            
            
            76,997Gross
                profit
            
            
            34,412Selling,
                general and administrative expenses
            
            
            182,486Loss
                from operations
            
            
            (148,074
            )Other
                income (expense):Interest
                expense
            
            
            (23,632
            )Net
                loss
            
            $
            (171,706
            )Loss
                per common share - basic and diluted
            
            $
            (.04
            )Weighted
                average shares outstanding - basic and diluted
            
            
            3,939,000








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




















Page
          23




BDC
      Capital, Inc.


STATEMENTS
      OF STOCKHOLDERS' EQUITY


Years
      Ended February 28, 2006 and 2005




**Preferred
                  Stock**
              
              **Common
                  Stock**
              
              **Additional****Series
                  A**
              
              
              
              
              
              
              
              **Paid-In**
              
              **Subscription**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **Receivable**
              
              **Deficit**
              
              **Total**Balance
                  February 29, 2004
              
              
              -
              
              $
              -
              
              
              3,939,000
              
              $
              39,390
              
              $
              4,217,841
              
              $
              (22,500
              )
              $
              (4,282,466
              )
              $
              (47,735
              )Payments
                  on stock subscription receivable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              22,500
              
              
              -
              
              
              22,500Net
                  loss - nine months ended 11/30/04
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (171,706
              )
              
              (171,706
              )Balance
                  November 30, 2004
              
              
              -
              
              
              -
              
              
              3,939,000
              
              
              39,390
              
              
              4,217,841
              
              
              -
              
              
              (4,454,172
              )
              
              (196,941
              )Debt
                  to equity conversion
              
              
              -
              
              
              -
              
              
              3,041,117
              
              
              30,411
              
              
              -
              
              
              -
              
              
              -
              
              
              30,411OID
                  costs on convertible debentures
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              584,322
              
              
              -
              
              
              -
              
              
              584,322Stock
                  dividend
              
              
              3,939,000
              
              
              39,390
              
              
              -
              
              
              -
              
              
              (39,390
              )
              
              -
              
              
              -
              
              
              -Net
                  increase in net assets - three months ended 2/28/05
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              390,244
              
              
              390,244Balance
                  February 28, 2005
              
              
              3,939,000
              
              
              39,390
              
              
              6,980,117
              
              
              69,801
              
              
              4,762,773
              
              
              -
              
              
              (4,063,928
              )
              
              808,036Debt
                  to equity conversion, including interest
              
              
              -
              
              
              -
              
              
              48,783,521
              
              
              487,835
              
              
              -
              
              
              -
              
              
              -
              
              
              487,835OID
                  costs on convertible debentures
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              340,000
              
              
              -
              
              
              -
              
              
              340,000Stock
                  issued in subscription agreements
              
              
              -
              
              
              -
              
              
              360,878,200
              
              
              3,608,782
              
              
              -
              
              
              (3,608,782
              )
              
              -
              
              
              -Payment
                  received on subscription agreements
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              58,782
              
              
              -
              
              
              58,782Common
                  stock issued
              
              
              -
              
              
              -
              
              
              10,930,300
              
              
              109,303
              
              
              -
              
              
              -
              
              
              -
              
              
              109,303Stock
                  dividend rescinded
              
              
              (3,939,000
              )
              
              (39,390
              )
              
              -
              
              
              -
              
              
              39,390
              
              
              -
              
              
              -
              
              
              -Debt
                  converted into preferred stock
              
              
              14,777,390
              
              
              147,774
              
              
              -
              
              
              -
              
              
              7,226
              
              
              -
              
              
              -
              
              
              155,000Preferred
                  stock issued
              
              
              5,222,610
              
              
              52,226
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              52,226Net
                  increase in net assets - 12 months ended 2/28/06
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,059,421
              )
              
              (1,059,421
              )20,000,000
              
              $
              200,000.00
              
              
              427,572,138
              
              $
              4,275,721
              
              $
              5,149,389
              
              $
              (3,550,000
              )
              $
              (5,123,349
              )
              $
              951,761





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




Page
          24




**BDC
      Capital, Inc.**


**STATEMENTS
      OF CASH FLOWS**





**As
                a Business**
              **Development****Company**
            
            **Prior
                to**
              **becoming
                a Business Development Company****Year
                Ended February 28,**
              **2006**
            
            **Three
                months Ended**
              **February
                28,**
              **2005**
            
            **Nine
                Months Ended**
              **November
                30,**
              **2004**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss from operations
            
            $
            -
            
            $
            -
            
            $
            (171,706
            )Net
                increase (decrease) in net assets resulting from operations as a
                business
                development company
            
            
            (1,059,421
            )
            
            390,244
            
            
            -Adjustments
                to reconcile net assets resulting from operations and net loss to
                net cash
                used by operating activities:Amortization
                of original issue discount
            
            
            775,906
            
            
            132,757
            
            
            16,284Administrative
                fees paid by issuance of convertible debt
            
            
            90,000
            
            
            -
            
            
            -Net
                change in unrealized appreciation on investments
            
            
            -
            
            
            (607,597
            )
            
            -Assets
                transferred to BDC Partners, Inc.
            
            
            -
            
            
            (16,223
            )
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            -
            
            
            -
            
            
            19,099Inventories
            
            
            
            
            
            -
            
            
            (960
            )Prepaid
                expenses
            
            
            (2,019
            )
            
            -
            
            
            -Accounts
                payable
            
            
            4,420
            
            
            (3,848
            )
            
            24,266Accrued
                liabilities
            
            
            24,076
            
            
            6,413
            
            
            (856
            )Investment
                in BDC Partners, Inc.
            
            
            (338,900
            )
            
            (50,000
            )
            
            -Due
                to BDC Partners, Inc.
            
            
            (1,690
            )
            
            2,100
            
            
            -Net
                cash used in operating activities
            
            
            (507,628
            )
            
            (146,154
            )
            
            (113,873
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Net
                proceeds (payments) from stockholder
            
            
            798
            
            
            -
            
            
            48,023Payments
                received on stockholder subscription receivable
            
            
            58,782
            
            
            -
            
            
            22,500Proceeds
                from issuance of notes payable-related party
            
            
            70,000
            
            
            -
            
            
            -Payments
                on convertible debt
            
            
            (278,314
            )
            
            -
            
            
            -Proceeds
                from issuance of preferred stock
            
            
            52,226
            
            
            -
            
            
            -Proceeds
                from issuance of common stock
            
            
            109,303
            
            
            -
            
            
            -Proceeds
                from issuance of convertible debentures
            
            
            250,000
            
            
            390,000
            
            
            50,000Net
                cash provided by financing activities
            
            
            262,795
            
            
            390,000
            
            
            120,523Net
                change in cash and cash equivalents for the period
            
            
            (244,833
            )
            
            243,846
            
            
            6,650Cash
                and cash equivalents at beginning of period
            
            
            260,179
            
            
            16,333
            
            
            9,683Cash
                and cash equivalents at end of period
            
            $
            15,346
            
            $
            260,179
            
            $
            16,333SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Cash
                payments for interest
            
            $
            9,906
            
            $
            -
            
            $
            100SUPPLEMENTAL
                SCHEDULE OF NONCASH INVESTING AND FINANCING
                ACTIVITIES:Issuance
                of common stock for stock subscription
            
            $
            3,550,000
            
            $
            -
            
            $
            -Preferred
                stock dividend rescinded
            
            $
            (39,390
            )
            $
            -
            
            $
            -Issuance
                of preferred stock dividend
            
            $
            -
            
            $
            39,390
            
            $
            -Debt
                to equity conversion, including accrued interest
            
            $
            642,835
            
            $
            31,321
            
            $
            -




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




Page
            25






**BDC
      Capital, Inc.**


**(formerly
      eNetpc, Inc.)**





**SCHEDULE
      OF INVESTMENTS**


**February
      28, 2006**








**Portfolio
                Company**
            **Principal
                business**
            **Investments**
            **Cost**
            **Fair
                Value**BDC
                Partners, Inc.
            Technology
            Equity
            $406,303
            $1,013,900








BDC
      Partners, Inc is a private company founded in 2004 and is located in
      Minneapolis, MN. It is a wholly own subsidiary of BDC Capital, Inc. that has
      a
      unique, multidisciplinary technology process paired with an intellectual
      property revenue-focused business model.










































































Page
            26





**BDC
      Capital, Inc.**




**NOTES
      TO FINANCIAL STATEMENTS**


**Years
      Ended February 28, 2006 and 2005**




**Note
      1. Nature of Business and Summary of Significant Accounting
      Policies** :





*Nature
      of business*





BDC
      Capital, Inc. (“The Company”) was formed as a Minnesota corporation on April 7,
      1982. It was incorporated under the name Command Small Computer Learning Center,
      Inc., a computer training company. In 1987, the Company changed its name to
      Command Electronics, Inc. In February 1995, the Company acquired CyberStar
      Computer Systems, a manufacturer and marketer of microcomputers and servers,
      and
      in 1997 it changed its name to CyberStar Computer Corporation. In 2000, the
      Company changed its name to eNetpc, Inc. In November of 2004 the Company changed
      its name to BDC Capital, Inc. BDC Capital, Inc. has engaged in the sale of
      computer components, development of software and resell of major computer
      brands. The names "BDC Capital, Inc." "we", "our" and "us" used in this report
      refer to BDC Capital, Inc.




On
      December 10, 2004, the Company elected to be regulated as a business development
      company (BDC) as outlined in the Investment Company Act of 1940 by filing a
      Form
      NT-54A. As a BDC, the Company plans to focus on current opportunities available
      to this attractive business model in these somewhat uncertain economic times.




*Investment
      Strategy*





BDC
      Capital, Inc. intends to build an investment portfolio consisting of revenue
      generating assets and emerging companies well positioned for future growth.
      A
      BDC is a unique kind of investment company that primarily focuses on investing
      in or lending to small private companies and making managerial assistance
      available to them. A BDC may use capital provided by public stockholders and
      from other sources to invest in growing small businesses.





A
      BDC
      provides stockholders the ability to retain the liquidity of a publicly traded
      stock while sharing in the possible benefits of investing in privately owned
      small-and medium-sized companies.




As
      a BDC,
      the Company is required to have at least 70% of its assets in portfolio
      companies.





*Conversion
      to Business Development Company*





The
      results of operations for 2005 are divided into two periods. The nine-month
      period, representing the period March 1, 2004 through November 30, 2004,
      reflects the Company's results prior to operating as a business development
      company under the Investment Company Act of 1940, as amended. The three-month
      period ended February 28, 2005, reflects the Company's results as a business
      development company under the Investment Company Act of 1940, as amended.
      Accounting principles used in the preparation of the financial statements
      beginning December 1, 2004 are different than those of prior periods and,
      therefore, the financial position and results of operations of these periods
      are
      not directly comparable. The primary differences in accounting principles relate
      to the carrying value of investments and consolidations.





Page
            27








Changes
      in unrealized gains (losses) on the change in value of portfolio investments
      for
      business development companies are recognized each period. Prior to becoming
      a
      business development company, unrealized gains (losses) on the change in value
      of investments were recorded as accumulated comprehensive income in the
      statement of stockholders equity. Gains (losses) on investment would only be
      recognized when realized or when an investment was permanently
      impaired.





As
      a
      business development company, consolidation of portfolio companies is not
      required in which the Company has a controlling interest. In contrast, prior
      to
      operating as a business development corporation, entities in which the Company
      had controlling interest would have been required to be
      consolidated.





The
      Company has determined that there is no cumulative effect adjustment for the
      three-month period ended February 28, 2005 in order to reflect the effects
      of
      conversion to a business development company.





*Revenue
      recognition - Prior to becoming a business development
      company*





The
      Company recognizes sales when the products are shipped. Revenue from services
      is
      recognized when the service is provided. The Company ensures that the
      transaction complies with the seven conditions and the six considerations
      contained in Accounting and Auditing Enforcement Release No. 108 of the
      Securities and Exchange Commission.





*Use
      of estimates*





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





*Cash
      Deposits in Excess of Federally Insured Limits*





The
      Company maintains its cash in bank deposit accounts which, at times, may exceed
      federally insured limits. The balances are insured by the Federal Deposit
      Insurance Company up to $100,000. Account balances in excess of federally
      insured limits were $0 and $140,173 at February 28, 2006 and 2005. The Company
      has not experienced any losses in such accounts.





*Cash
      and cash equivalents*





The
      Company considers all highly liquid investments with original maturity of three
      months or less when purchased to be cash equivalents.




*Valuation
      of Investments*





Value,
      as
      defined in Section 2(a)(41) of 1940 Act, is (i) the market price for those
      securities for which a market quotation is readily available and (ii) for all
      other securities and assets, fair value is as determined in good faith by the
      board of directors. Since there is typically no readily available market value
      for the Company’s privately held investments, the Company values substantially
      all of its investments at fair value as determined in good faith by the board
      of
      directors pursuant to a valuation policy and a consistent valuation process.
      At
      February 28, 2006, approximately 98% of the Company’s total assets represented
      investments of which approximately 100% are valued at fair value. Because of
      the
      inherent uncertainty of determining the fair value of investments that do not
      have a readily available market value, the fair value of the Company’s
      investments determined in good faith by the board of directors may differ
      significantly from the values that would have been used had a ready market
      existed for the investments, and the differences could be material.







Page
            28








There
      is
      no single standard for determining fair value in good faith. As a result,
      determining fair value requires that judgment be applied to the specific facts
      and circumstances of each portfolio investment. The Company must determine
      the
      fair value of each individual investment on a quarterly basis. The Company
      records unrealized depreciation on investments when it believes that an
      investment has decreased in value, including where collection of a loan or
      realization of an equity security is doubtful. Conversely, the Company records
      unrealized appreciation if it believes that the underlying portfolio company
      has
      appreciated in value and, therefore, the Company’s investment has also
      appreciated in value, where appropriate.




As
      a BDC,
      the Company invests primarily in illiquid securities including debt and equity
      securities of private companies. The Company’s investments are generally subject
      to some restrictions on resale and generally have no established trading market.
      Because of the type of investments that the Company makes and the nature of
      its
      business, the Company’s valuation process requires an analysis of various
      factors. The Company’s fair value methodology includes the examination of, among
      other things, the underlying portfolio company performance, financial condition
      and market changing events that impact valuation.





With
      respect to private debt and equity securities, each investment is valued using
      industry valuation benchmarks, and, where appropriate, the value is assigned
      a
      discount reflecting the illiquid nature of the investment and/or the Company’s
      minority, non-control position. When an external event such as a purchase
      transaction, public offering, or subsequent equity sale occurs, the pricing
      indicated by the external event will be used to corroborate the Company’s
      private debt or equity valuation.





*Investments
      in equity securities*





Under
      BDC
      accounting, all equity investments are carried at fair value with any
      adjustments recorded in the statement of operations, combined with adjustments
      in the fair value of investments in loans, as investment gains
      (losses)—unrealized.





In
      accordance with Article 6 of Regulation S-X under the Securities Act of 1933
      and
      Securities Exchange Act of 1934, the Company does not consolidate portfolio
      company investments, including those in which it has a controlling interest.





*Long-Lived
      Assets*





Long-lived
      assets, such as property and equipment are reviewed for impairment whenever
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. Recoverability of assets to be held and used is measured by
      comparison of the carrying amount of an asset to estimated undiscounted future
      cash flows expected to be generated by the asset. If the carrying amount of
      an
      asset exceeds its estimated future cash flows, an impairment charge is
      recognized in the amount by which the carrying amount of the asset exceeds
      the
      fair value of the asset.





*Income
      taxes*





Deferred
      taxes are provided on a liability method whereby deferred tax assets are
      recognized for deductible temporary differences and operating losses and tax
      credit carryforwards and deferred tax liabilities are recognized for taxable
      temporary differences. Temporary differences are the differences between the
      reported amounts of assets and liabilities and their tax basis. Deferred tax
      assets are reduced by a valuation allowance when, in the opinion of management,
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. Deferred tax assets and liabilities are adjusted for
      the
      effects of changes in tax laws and rates on the date of the
      enactment.







Page
            29








*Stock-based
      employee compensation:*





The
      Company follows Accounting Principles Board Opinion No. 25, Accounting for
      Stock
      Issued to Employees ("APB 25") and related interpretations in accounting for
      its
      stock options. Under APB 25, when the exercise price of stock options equals
      the
      market price of the underlying stock on the date of grant, no compensation
      expense is recognized. The Company has elected to follow the disclosure only
      provisions of Statement of Financial Accounting Standards No. 123, Accounting
      for Stock-Based Compensation ("Statement 123"). Accordingly, the pro forma
      disclosures of what net income (loss) would have been had the provisions of
      Statement 123 been applied to the Company's stock options is as
      follows:





For
                the year
              ended
              February
                28,
              2006
            
            For
                the three
              months
                ended
              February
                28,
              2005
            
            For
                the nine
              months
                ended
              November
                30,
              2004Net
                income (loss) as reported
            
            $
            (1,059,421
            )
            $
            390,244
            
            $
            (171,706
            )Pro
                forma fair value compensation
            
            
            -
            
            
            -
            
            
            -Pro
                forma net income (loss)
            
            $
            (1,059,421
            )
            $
            390,244
            
            
            (171,706
            )Basic
                income (loss) per share:As
                reported
            
            $
            (.01
            )
            $
            .07
            
            $
            (.04
            )Proforma
            
            $
            (.01
            )
            $
            .07
            
            $
            (.04
            )Dilutive
                income (loss) per share:As
                reported
            
            $
            (.01
            )
            $
            .01
            
            $
            (.04
            )Proforma
            
            $
            (.01
            )
            $
            .01
            
            $
            (.04
            )





Pro
      forma
      information regarding net income (loss) is required by Statement 123, and has
      been determined as if the Company had accounted for its employee stock options
      under the fair value method of Statement 123. There were no options issued
      for
      the year ended February 28, 2006, the three months ended February 28, 2005
      and
      the nine months ended November 30, 2004. All previous option grants are fully
      vested as of February 29, 2004.





*Advertising*





Advertising
      costs are charged to operations when incurred. The Company did not incur any
      advertising expense during the year ended February 28, 2006, the three months
      ended February 28, 2005 and the nine months ended November 30,
      2004.





*Net
      loss per share*





Basic
      loss per share is computed using the weighted average number of shares
      outstanding for the period. Diluted loss per share is computed using the
      weighted average number of shares outstanding per share adjusted for the
      incremental shares attributed to outstanding stock options under the Company's
      stock option plans, convertible debt and convertible preferred stock.
      Incremental shares attributable to the assumed exercise of stock options and
      conversion of debt and preferred stock for the year ended February 28, 2006
      and
      the nine months ended November 30, 2004 were excluded from the computation
      of
      diluted loss per share as their effect would be anti-dilutive. The diluted
      income per share computation does include the adjusted incremental shares for
      the convertible debentures and stock options for the three months ended February
      28, 2005.





Page
            30








*Recently
      issued accounting pronouncements*




In
      December 2004, the Financial Accounting Standards Board ("FASB") issued
      Statement No. 123(R), "Shared-Based Payment," which is a revision of SFAS No.
      123, and supersedes APB Opinion No. 25. SFAS 123(R) requires all share-based
      payments to employees and directors, as well as other equity-based compensation
      arrangements, to be recognized in the financial statements based on their fair
      values, using prescribed option-pricing models effective for the first annual
      period beginning after June 15, 2005. The pro forma disclosure previously
      permitted under SFAS No. 123 will no longer be an alternative to financial
      statement recognition. The adoption of this statement becomes effective for
      the
      Company on March 1, 2006.






The
      impact of adopting Statement No. 123(R) can not be predicted at this time
      because it will depend on levels of share-based payments granted in the future,
      valuation methodology adopted and assumptions selected at the time of future
      grants. With the adoption of Statement No. 123(R), the Company may elect to
      utilize a different valuation method and/or different valuation assumptions.
      These selections may have a significant impact on the amount of share based
      payment expense under Statement No. 123(R).






In
      May
      2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections"
      which
      replaces APB Opinion No. 20 "Accounting Changes" and SFAS No. 3, "Reporting
      Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion
      No. 28." SFAS 154 provides guidance on the accounting for and reporting of
      accounting changes and error corrections. It establishes retrospective
      application, or the latest practicable date, as the required method for
      reporting a change in accounting principle and the reporting of a correction
      of
      an error. SFAS 154 is effective for accounting changes and corrections of errors
      made in fiscal years beginning after December 15, 2005. The Company is currently
      evaluating the effect that the adoption of SFAS 154 will have on our results
      of
      operations and financial condition but does not expect that adoption will have
      a
      material impact.




**Note
      2. Property and Equipment**





Property
      and equipment are as follows at February 28:





**2006**
            
            **2005**Office
                equipment and furniture
            
            $
            469,666
            
            $
            469,666Less
                accumulated depreciation
            
            
            (455,028
            )
            
            (455,028
            )Less
                impairment of equipment
            
            
            (14,638
            )
            
            (14,638
            )$
            
            
            $





Depreciation
      expense was $0 for the year ended February 28, 2006, the three months ended
      February 28, 2005 and the nine months ended November 30, 2004. Depreciation
      was
      calculated over the assets useful lives ranging from three to seven
      years.








Page
            31








**Note
      3. Convertible debentures**




The
      Company had convertible debentures totaling $488,911 as of February 28, 2005,
      bearing interest at 8.0% payable at maturity and are convertible at 50% of
      the
      Company’s common stock fair value. In addition, the Company obtained $250,000
      convertible debenture on March 26, 2005, bearing interest at 8% and convertible
      as previously noted. The debentures matured at various dates from April 1,
      2005
      through March 25, 2007. These debentures plus any accrued interest are
      convertible as of the date of issuance at the option of the Company or the
      debt
      holder. These debentures are subordinated to any bank financing. The
      application of the provisions of EITF 98-5, “Accounting for Convertible
      Securities with Beneficial Conversion Features or Contingently Adjustable
      Conversion Ratios,” and EITF 00-27, “Application of Issue 98-5 to Certain
      Convertible Instruments” resulted in the calculation of an embedded beneficial
      conversion feature which is required to be treated as an additional discount
      to
      the debt. The unamortized value of the beneficial conversion feature was
      $377,821 as of February 28, 2005. An additional beneficial conversion feature
      value of $250,000 was recorded for debt entered into for the year ended February
      28, 2006. Amortization of the beneficial conversion feature into interest
      expense for the year ended February 28, 2006, the three months ended February
      28, 2005 and the nine months ended November 30, 2004 was $627,821, $125,842
      and
      $15,659, respectively. As of February 28, 2006, these debentures had either
      been
      paid or converted into stock.





During
      2005, the Company had also issued long-term convertible preferred debentures
      to
      a majority stockholder totaling $65,000, bearing interest at 8.0% payable at
      maturity and are convertible at 50% of the Company’s common stock fair value.
      The debenture matures in February 2007. The Company also issued $90,000 in
      convertible debentures for services rendered to its majority stockholder during
      the year ended February 28, 2006. These debentures plus any accrued interest
      are
      convertible as of the date of issuance at the option of the Company or the
      debt
      holder. These debentures are subordinated to any bank financing. The application
      of the provisions of EITF 98-5, “Accounting for Convertible Securities with
      Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,”
and EITF 00-27, “Application of Issue 98-5 to Certain Convertible Instruments”
resulted in the calculation of an embedded beneficial conversion feature which
      is required to be treated as an additional discount to the debt. The value
      of
      the beneficial conversion feature was $58,085 as of February 28, 2005 and an
      additional beneficial conversion feature value of $90,000 was recorded for
      the
      additional debt entered into for the year ended February 28, 2006. Amortization
      of the beneficial conversion feature into interest expense for the year ended
      February 28, 2006 and the three months ended February 28, 2005 was $148,085
      and
      $6,915, respectively. All debentures were converted into stock during the year
      ended February 28, 2006.





Upon
      conversion, convertible debentures are issued with binding term sheets that
      require the following terms upon the sale of the converted stock by the
      purchaser:





A)
            Purchaser
                shall first be entitled to an amount equal to 200% of the face amount
                of
                each debenture attributable to the sale of common stock acquired
                from the
                conversion of the associated debt.





B)
            After
                the Purchaser receives the amount in A above, the Company shall be
                entitled to 50% of any additional Net Sales Proceeds of the stock.
                Net
                Sales Proceeds shall mean the gross proceeds received from the sale
                of the
                stock, less reasonable brokerage
                commissions.





C)
            Final
                adjusted Net Sales Proceeds are to be wired to the Company within
                7 days
                from the date of the final settlement of the sale of stock from the
                conversion of all of the outstanding
                debentures.




No
      net
      sales proceeds were received by the Company during the years ended February
      28,
      2006 and 2005.





Page
            32






As
      of
      February 28, 2005, the Company entered into binding term sheets that also
      provide for convertible debt financing similar to the terms above totaling
      $16.5
      million. The Company, at its option may draw up to $50,000 weekly against the
      total investor commitment over a 24 month period beginning February 28, 2006,
      subject to certain restrictions. As of February 28, 2006, no draws have been
      made against this commitment.





**Note
      4. Notes payable - stockholder**





The
      Company had advances from a stockholder in the amount of $70,000 and $0 at
      February 28, 2006 and 2005, respectively. The unsecured notes are due at various
      dates from June 21, 2007 to August 1, 2007 with an interest rate of 8%. Interest
      expense was accrued during the years ended February 28, 2006 and 2005 totaling
      $3,876 and 0, respectively.





**Note
      5. Income Taxes**





At
      February 29, 2006, the Company had net operating loss carryforwards of
      approximately $4,595,000. The net operating loss carryforwards are available
      to
      offset future taxable income through 2025 and may be subject to the limitations
      under Section 382 of the Internal Revenue Code if significant changes in the
      equity ownership of the Company have occurred. If not used, net operating loss
      carryforwards begin to expire in the following amounts each year:





2007
            
            
            5,0002011
            
            
            39,0002012
            
            
            97,0002018
            
            
            41,0002019
            
            
            900,000Thereafter
            
            
            3,513,000Total
            
            $
            4,595,000





The
      Company has recorded a full valuation allowance against its net deferred tax
      asset due to the uncertainty of realizing the related net benefits as
      follows:





**2006**
            
            **2005**Deferred
                tax assets:Net
                operating loss carryforwards
            
            $
            1,724,000
            
            $
            1,650,000Deferred
                tax liabilities:Unrealized
                appreciation on investments
            
            
            (207,000
            )
            
            (207,000
            )Net
                deferred tax assets
            
            
            1,517,000
            
            
            1,443,000Valuation
                allowance
            
            
            (1,517,000
            )
            
            (1,443,000
            )Net
                deferred tax assets
            
            $
            -
            
            $
            -





Reconciliation
      between the federal statutory rate and the effective tax rate for the years
      ended February 28, 2006 and February 28, 2005 is as follows:





**2006**
            
            **2005**Federal
                statutory tax rate
            
            
            34.0
            %
            
            34.0
            %State
                taxes, net of federal benefit
            
            
            4.0
            %
            
            4.0
            %Change
                in valuation allowance
            
            
            (38.0
            )%
            
            (38.0
            )%Effective
                tax rate
            
            
            0.0
            %
            
            0.0
            %








Page
            33








**Note
      6. Stockholders' Equity (Deficit)**





***Preferred
      Stock***





The
      Series A Preferred Stock ("Series A Preferred") is non-interest bearing, does
      not have voting rights and is not entitled to receive dividends. Each share
      of
      Series A Preferred issued can be converted into common stock on a 1:1 basis
      after a twelve month period. Should a liquidation event occur, the Series A
      Preferred automatically converts into common stock based on the foregoing
      formula. Further, the Series A Preferred is not affected by forward or reverse
      splits on the Corporation's common stock or other adjustments to the
      Corporation's capital structure. Finally, Series A Preferred is entitled to
      elect a majority of the Corporation's board of directors at all times, provided
      that a majority of the board of directors is, at all times,
      independent.





The
      Corporation has currently 20,000,000 and 3,939,000 Series A Preferred issued
      and
      outstanding as of February 28, 2006 and 2005, respectively.





***Stock
      Dividend***





On
      February 4, 2005 the board of directors of BDC Capital, Inc. ("Corporation")
      authorized the issuance of 3,939,000 shares of Class A Preferred Stock in a
      stock dividend to each stockholder of record as of November 30, 2004. For each
      share of common stock held as of the Record Date, the Company shall issue one
      share of Preferred Series A stock. The Corporation relied on exemptions provided
      by Section 4(2) of the Securities Act of 1933, as amended. In November 2005,
      the
      Company rescinded this stock dividend.





***Stock
      options***





The
      Company has a stock option plan that includes both incentive and non-statutory
      stock options granted to directors, officers, employees and consultants of
      the
      Company. The maximum number of shares of Common Stock reserved for issuance
      is
      1,000,000 shares under the 1996 Stock Option Plan. Option activity is summarized
      as follows:





**Options**
              **Outstanding**
            
            **Non-Plan**
              **Options**
            
            **Total**
              **Options**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                Per**
              **Share**Balance
                at February 29, 2004
            
            
            1,000,000
            
            
            40,000
            
            
            1,040,000
            
            
            1.08Options
                granted
            
            
            -
            
            
            -
            
            
            -
            
            
            -Options
                cancelled
            
            
            (577,800
            )
            
            (40,000
            )
            
            (617,800
            )
            
            5.69Balance
                at February 28, 2005
            
            
            422,200
            
            
            -
            
            
            422,200
            
            
            1.04Options
                granted
            
            
            -
            
            
            -
            
            
            -
            
            
            -Options
                cancelled
            
            
            -
            
            
            -
            
            
            -
            
            
            -Balance
                at February 28, 2006
            
            
            422,200
            
            
            -
            
            
            422,200
            
            $
            1.04











Page
            34





**Note
      7. Related Party Transactions**





As
      a
      business development company, the Company has issued convertible debentures
      totaling $204,322, as of February 28, 2005, bearing interest at 8.0% payable
      at
      maturity to various family members of the majority stockholder during the year
      ended February 28, 2005. This debt was converted into 20,432,200 shares of
      stock
      during 2005 and 2006. Interest expense was accrued during the years ended
      February 28, 2006 and 2005 totaling $0 and $2,953, respectively.




The
      Company issued a convertible debenture totaling $90,000 to its majority
      stockholder for administrative services performed during the year ended February
      28, 2006. This debenture has been converted into 9,000,000 shares of Series
      A
      Preferred Stock.





The
      Company sub-leases from a director of the Company approximately 1,000 square
      feet of space used for offices and operations equipment storage at 11974
      Portland Avenue, Burnsville, Minnesota at a monthly rent of $750 renewable
      monthly which is split equally between BDC Capital, Inc. and BDC Partners,
      Inc.
      The Company’s lease payments made to the director for the years ended February
      28, 2006 and 2005 were $4,500 and $750, respectively.





**Note
      8. Commitments and Contingencies**





The
      Company is exposed to asserted and unasserted claims encountered in the normal
      course of business. In the opinion of management, the resolution of these
      matters will not have a material adverse effect on the Company's financial
      position or results of operations.





**Note
      9. Major Customers** ***- Prior to becoming a business development company***





The
      Company had one customer which represented 73% of total sales for the nine
      months ended November 30, 2004. Accounts receivable from this customer was
      $0 at
      February 28, 2005.





**Note
      10. Financial Highlights** ***-
      as a business development company:***





Following
      is a schedule of financial highlights for the year ended February 28, 2006
      and
      the three months ended February 28, 2005:





**2006**
            
            **2005**Per
                Share Data:Net
                asset value, at conversion to a BDC
            
            
            
            
            $
            (.05
            )Net
                asset value, beginning of period
            
            $
            0.12
            
            
            -Income
                from investment operations:Net
                investment loss
            
            
            (0.01
            )
            
            (0.05
            )Net
                realized gains on investments
            
            
            -
            
            
            -Net
                unrealized appreciation on investments
            
            
            -
            
            
            0.13Net
                increase (decrease) in net assets resulting from
                operations
            
            
            (0.01
            )
            
            0.08Dividends
            
            
            -
            
            
            -Issuance
                of shares
            
            
            .01
            
            
            0.01Issuance
                of preferred shares
            
            
            .01
            
            
            -Dilutive
                effect of share insurances
            
            
            (0.13
            )
            
            (0.07
            )Increase
                in stockholders' equity (deficit) from OID on convertible
                debentures
            
            
            -
            
            
            0.15Increase
                (decrease) in stockholder's equity relating to equity
                issuances
            
            
            (0.11
            )
            
            0.09Net
                asset value, end of period
            
            $
            0.00
            
            $
            0.12Per
                share market value at end of period
            
            
            0.02
            
            
            0.02Total
                Return
            
            
            0
            %
            
            (400
            %)Common
                shares outstanding at end of period, February 28, 2006 and
                2005
            
            
            427,572,138
            
            
            6,980,117Ratio/Supplemental
                Data:Net
                assets end of period
            
            $
            951,761
            
            $
            808,036Ratio
                of operating expenses to average net assets (annualized)
            
            
            120
            %
            
            285
            %Ratio
                of net investment loss to average assets (annualized)
            
            
            120
            %
            
            285
            %














Page
      35