----

----

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

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

*000-27225*

| 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 |

----

----

** **

| PART                  I   |                                                                                                                                                        | 1        |
|---------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                      |                                                                                                                                                        |     |
| Item                  1.  | Business                                                                                                                                                    |  1  |
|                      |                                                                                                                                                        |     |
| Item                  1A. | Risk                  Factors                                                                                                                               |  2  |
|                      |                                                                                                                                                        |     |
| Item                  2.  | Properties                                                                                                                                                  | 4        |
|                      |                                                                                                                                                        |     |
| Item                  3.  | Legal                  Proceedings                                                                                                                          |  4  |
|                      |                                                                                                                                                        |     |
| Item                  4.  | Submission                  of Matters to a Vote of Security Holders                                                                                        |  4  |
|                      |                                                                                                                                                        |     |
| PART                  II  |                                                                                                                                                        |  5  |
|                      |                                                                                                                                                        |     |
| Item                  5.  | Market                  for the Registrant’s Common Equity and Related Stockholder Matters and                  Issuer Purchases of Equity Securities |  5  |
|                      |                                                                                                                                                        |     |
| Item                  6.  | Selected                  Financial Data                                                                                                                    |  6  |
|                      |                                                                                                                                                        |     |
| Item                  7.  | Management's                  Discussion and Analysis of Financial Condition and Results of                  Operations                                     |  7  |
|                      |                                                                                                                                                        |     |
| Item                  7A. | Quantitative                  and Qualitative Disclosures About Market Risk                                                                                 |  11 |
|                      |                                                                                                                                                        |     |
| Item                  8.  | Financial                  Statements and Supplementary Data                                                                                                |  11 |
|                      |                                                                                                                                                        |     |
| Item                  9.  | Changes                  in and Disagreements with Accountants on Accounting and Financial                  Disclosure                                      |  11 |
|                      |                                                                                                                                                        |     |
| Item                  9A. | Controls                  and Procedures                                                                                                                    |  12 |
|                      |                                                                                                                                                        |     |
| Item                  9B. | Other                  Information                                                                                                                          |  12 |
|                      |                                                                                                                                                        |     |
| PART                  III |                                                                                                                                                        |  13 |
|                      |                                                                                                                                                        |     |
| Item                  10. | Directors                  and Executive Officers of the Registrant                                                                                         |  13 |
|                      |                                                                                                                                                        |     |
| Item                  11. | Executive                  Compensation                                                                                                                     |  14 |
|                      |                                                                                                                                                        |     |
| Item                  12. | Security                  Ownership of Certain Beneficial Owners and Management and Related                  Stockholder Matters                            |  15 |
|                      |                                                                                                                                                        |     |
| Item                  13. | Certain                  Relationships and Related Transactions                                                                                             |  16 |
|                      |                                                                                                                                                        |     |
| Item                  14. | Principle                  Accountants and Fees and Services                                                                                                |  16 |
|                      |                                                                                                                                                        |     |
| PART                  IV  |                                                                                                                                                             |  19 |
|                      |                                                                                                                                                        |     |
| Item                  15. | Exhibits,                  Financial Statement Schedules                                                                                                    |  19 |
|                      |                                                                                                                                                        |     |
| SIGNATURES                |  19                                                                                                                                                    |

----

| ITEM                  1. | BUSINESS |
|--------------------------|----------|

**          **

----

| ITEM                  1A. | RISK                  FACTORS |
|---------------------------|-------------------------------|

**RISKS        RELATED TO OUR BUSINESS**

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

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

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

----

**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**

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

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

**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        Common Stock Price May be Volatile **

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

| - | 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; |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | 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 |
|--------------------------|------------|

| ITEM                  3. | LEGAL                  PROCEEDINGS |
|--------------------------|------------------------------------|

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

----

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

| Fiscal                  Year 2007 |   | Low    |   | High   |   |
|-----------------------------------|--------|--------|--------|--------|--------|
| First                  Quarter    |   | $      | 1.18   |   | $      | 2.53 |   |
| Second                  Quarter   |   |   | 1.12   |   |   | 2.25 |   |
| Third                  Quarter    |   |   | 7.00   |   |   | 1.50 |   |
| Fourth                  Quarter   |   |   | 1.50   |   |   | 2.70 |   |

| Fiscal                  Year 2006 |   | Low    |   | High   |   |
|-----------------------------------|--------|--------|--------|--------|--------|
| First                  Quarter    |   | $      | 12.00  |   | $      | 12.75 |   |
| Second                  Quarter   |   |   | 2.25   |   |   | 2.25 |   |
| Third                  Quarter    |   |   | 1.50   |   |   | 1.50 |   |
| Fourth                  Quarter   |   |   | 1.50   |   |   | 3.00 |   |

----

| ITEM                  6. | SELECTED                  FINANCIAL DATA |
|--------------------------|------------------------------------------|

|                                        |   | **February                  28,** |    | **February                  28,** |   |
|---------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|
| **Balance                  Sheet Data**     |   | **2007**                          |    | **2006**                          |   |
| Total                  Assets               |   | $                                 | 453,069 |                              | $      | 240,043 |   |
| Total                  Liabilities          |   |                              | 284,008 |                              |   | 85,338 |   |
| Stockholders’                  Equity |   |                              | 169,061 |                              |   | 154,705 |   |

| **Operating                  Statement Data**                |   | **For                  the year ended****February                  28,****2007** |                         |
|--------------------------------------------------------------|--------|----------------------------------------------------------------------------------|------------------------------|
| Operating                  expenses                          |   | $                                                                                | 5,740,928                    |   |
| Loss                  from operations                        |   |                                                                             | (5,740,928                   | ) |
| Other                  income (expense), net                 |   |                                                                             | (819                         | ) |
| Net                  loss                                    |   | $                                                                                | (                  5,741,747 | ) |
|                                                         |   |                                                                             |                         |   |
| Income                  (loss) per common share-basic        |   | $                                                                                | (0.42                        | ) |
| Income                  (loss) per common share-diluted      |   | $                                                                                | (0.42                        | ) |
| Weighted                  average shares outstanding-basic   |   |                                                                             | 13,537,116                   |   |
| Weighted                  average shares outstanding-diluted |   |                                                                             | 13,537,116                   |   |

|                                                                  |   | **As                  a Business Development Company**                           |                         |
|-----------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|------------------------------|
| **Operating                  Statement Data**                         |   | **For                  the year ended****February                  28,****2006** |                         |
| Investment                  income                                    |   | $                                                                                | 823                          |   |
| Operating                  expenses                                   |   |                                                                             | (1,060,244                   | ) |
| Net                  investment loss                                  |   |                                                                             | (1,059,421                   | ) |
| Net                  change in unrealized appreciation on investment  |   |                                                                             | -                            |   |
| Net                  decrease in net assets resulting from operations |   | $                                                                                | (                  1,059,421 | ) |
|                                                                  |   |                                                                             |                         |   |
| Income                  (loss) per common share-basic                 |   | $                                                                                | (0.82                        | ) |
| Income                  (loss) per common share-diluted               |   | $                                                                                | (0.82                        | ) |
| Weighted                  average shares outstanding-basic            |   |                                                                             | 1,291,556                    |   |
| Weighted                  average shares outstanding-diluted          |   |                                                                             | 1,291,556                    |   |

----

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

**Withdrawal        as a Business Development Company**

|   | · | BDCs                  are subject to restrictions in the 1940 Act on the type and amount                  of                  securities, other than common stock, that they can issue. We believe                  that                  the Company would be better served by greater flexibility in our                  capital                  structure. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                  closely regulated nature of BDCs causes them to be subject to greater                  legal and accounting expenses. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

----

***As        a business development company***

***As        a business development company***

----

**Critical        Accounting Policies **

**Intangible        Assets- Domain Names **

**Impairment        of Long-Lived Assets**

***Recently        issued accounting pronouncements:***

----

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

| ITEM                  8. | FINANCIAL                  STATEMENTS AND SUPPLEMENTAL DATA |
|--------------------------|-------------------------------------------------------------|

|                                                                     | Page        |
|--------------------------------------------------------------------------|-------------|
| Report                  of Independent Registered Public Accounting Firm |  21    |
|                                                                     |        |
| Consolidated                  Financial Statements:                      |        |
| Consolidated                  Balance Sheets                             |  22    |
| Consolidated                  Statements of Operations                   |  23    |
| Consolidated                  Statements of Stockholders' Equity         |  24    |
| Consolidated                  Statements of Cash Flows                   |  25    |
| Consolidated                  Notes to Financial Statements              |  26-37 |

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

----

| ITEM                  9A. | CONTROLS                  AND PROCEDURES |
|---------------------------|------------------------------------------|

| ITEM                  9B. | OTHER                  INFORMATION |
|---------------------------|------------------------------------|

----

| ITEM                  10. | DIRECTORS                  AND EXECUTIVE OFFICERS OF THE                  REGISTRANT |
|---------------------------|--------------------------------------------------------------------------------------|

| Name                               |   | Age  |   | Position                                                                 |
|------------------------------------|--------|-----------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Richard                  A. Pomije |   | 52        |   | Chairman,                  President, CEO & Secretary/Treasurer, acting CFO                                                                                                                                                                                                                                                                                                                          |
|                               |   |      |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| Jeff                  Mills        |   | 46        |   | Director                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               |   |      |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| Dan                  Janisch       |   | 60        |   | Director                                                                                                                                                                                                                                                                                                                                                                                                 |

----

| ITEM                  11. | EXECUTIVE                  COMPENSATION |
|---------------------------|-----------------------------------------|

**Summary        Compensation Table**

| Name                  and Principle Position |   | Fiscal                  Year |   | Salary |    | Stock                  OptionAwards(1) |   | Other                  Annual Compensation(2)                  , (3) & (4) |   | TotalCompensation |   |
|----------------------------------------------|--------|------------------------------|--------|--------|---------|----------------------------------------|--------|--------------------------------------------------------------------------------|--------|-------------------|--------|
|                                         |   |                         |   |   |    |                                   |   |                                                                           |   |              |   |
| Richard                  A. Pomije,          |   |  2007                   |   | $      | 185,000 |                                   | $      | 4,312,420                                                                      |   | $                 | 12,952 |   | $ | 4,510,372 |   |
| Chariman                and CEO              |   |  2006                   |   | $      | 125,325 |                                   |   | -                                                                              |   | $                 | 5,000  |   | $ | 130,325 |   |
|                                         |   |                         |   |   |    |                                   |   |                                                                           |   |              |   |   |   |   |   |
| David                  Pomije, former CEO    |   |  2007                   |   | $      | 0       |                                   | $      | 431,242                                                                        |   | $                 | 0      |   | $ | 431,242 |   |

| (1) | Option                    awards reflect the Black-Sholes values used for expensing options                    in the                    Company’s income statement.  For additional information, see                    Note 8 of the Company’s financial statements.  The value of the                    portion of the award that is ultimately expected to vest is recognized                    as                    expense over the requisite service                    periods |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Automobile                    expenses. |
|-----|-----------------------------------------|

| (3) | Board                    member fees |
|-----|--------------------------------------|

| (4) | Health                    insurance. |
|-----|--------------------------------------|

----

**OPTIONS        GRANTED IN THE LAST FISCAL YEAR**

| **Name**                           | **Grant                  Date** | **Number                  of shares -****Underlying                  options****granted** | **Exercise                  Price****($/share)** | **Grant                  Date****Fair                  Value** | **Expiration****date** |
|------------------------------------|---------------------------------|-------------------------------------------------------------------------------------------|--------------------------------------------------|----------------------------------------------------------------|------------------------|
| Richard                  A. Pomije | 9/6/2006                   | 2,500,000                                                                            | $1.725                                           | $1.725                                                         |  11/1/2011        |
| Jeff                  Mills   | 9/6/2006                   |                       40,000                                     | $1.725                                           | $1.725                                                         |  11/1/2011        |
| David                  Pomije(1)   | 9/6/2006                        |   250,000                                                                       | $1.725                                           | $1.725                                                         |  11/1/2011        |
| Dan                  Janisch  | 9/6/2006                        |                       20,000                                     | $1.725                                           | $1.725                                                         |  11/1/2011        |

|   | (1) | Former                    CEO, resigned January 31, 2007 |
|--------|-----|----------------------------------------------------------|

**OUTSTANDING          OPTIONS AT FISCAL YEAR-END**

**.**

| **Name**                           | **Number                  of****Unexercised                  Options****Exercisable** | **Grant****Date** | **Number                  of****Unexercised                  Options****Unexercisable** | **Option                  Exercise****Price                  ($/share)** | **Option****Expiration****Date** |
|------------------------------------|---------------------------------------------------------------------------------------|-------------------|-----------------------------------------------------------------------------------------|--------------------------------------------------------------------------|----------------------------------|
| Richard                  A. Pomije | 2,500,000                                                                             | 9/6/2006          | 0                                                                                       | $1.725                                                                   |  11/1/2011                  |
| Jeff                  Mills        |                       40,000                                      | 9/6/2006          | 0                                                                                       | $1.725                                                                   |  11/1/2011                  |
| David                  Pomije(1)   |                     250,000                                                 | 9/6/2006          | 0                                                                                       | $1.725                                                                   |  11/1/2011                  |
| Dan                  Janisch       |                       20,000                                      | 9/6/2006          | 0                                                                                       | $1.725                                                                   |  11/1/2011                  |

|   | (1) | Former                  CEO, resigned January 31, 2007 |
|--------|-----|--------------------------------------------------------|

**OPTIONS        EXERCISES IN THE LAST FISCAL YEAR**

**DIRECTORS'        COMPENSATION**

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

----

| Name                  of Beneficial Owner (1)                    | Numberof                  shares | Percentage                  of Outstanding                  Shares |
|------------------------------------------------------------------|----------------------------------|--------------------------------------------------------------------|
| Richard                  A. Pomije                               | 16,770,595                       | 65.25%                                                             |
|                                                             |                             |                                                               |
| Jeff                  Mills                                      | 402,668                          | 1.57%                                                              |
|                                                             |                             |                                                               |
| Dan                  Janisch                                     | 200,000                          | 0.78%                                                              |
|                                                             |                             |                                                               |
| All                  directors and executive officers as a group | 17,373,263                       | 67.60%                                                             |

| ITEM                  13. | CERTAIN                  RELATIONSHIPS AND RELATED                  TRANSACTIONS |
|---------------------------|----------------------------------------------------------------------------------|

| ITEM                  14. | Independent                  Registered Public Accounting Firm                  Fees. |
|---------------------------|---------------------------------------------------------------------------------------|

|                                |   | 2007   |   | 2006   |   |
|-------------------------------------|--------|--------|--------|--------|--------|
| Audit                  fees (1)     |   | $      | 36,732 |   | $      | 27,060 |   |
| Audit                  related      |   |   | -      |   |   | - |   |
| Tax                  fees           |   |   | -      |   |   | - |   |
| All                  other fees (2) |   |   | 1,215  |   |   | - |   |

----

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

| · | 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **ITEM                  15.** | **EXHIBITS,                  CONSOLIDATED FINANCIAL STATEMENT                  SCHEDULES** |
|-------------------------------|--------------------------------------------------------------------------------------------|

|   | (a) | Consolidated                  Financial Statements |
|--------|-----|----------------------------------------------------|

|   | (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 |
|--------|----|----------------------------------------------------|

|                                  | DigitalTown,                  INC. |
|---------------------------------------|------------------------------------|
|                                  |                               |   |
| Dated:                  June 14, 2007 | By:                                |  /s/                  Richard A.                  Pomije                             |
|                                  |                               | Richard                  A. Pomije, Chief Executive Officer |
|                                  |                               | (Principal                  executive officer) |

| Dated:                  June 14, 2007 | By:        |  /s/                  Richard A.                  Pomije                                                                                                      |
|---------------------------------------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  |            | Richard                  A. Pomije, Director, Chief Executive Officer,Chief                  Financial Officer and President (Principal executive                  officer)                                                                                                                                              |
|                                  |            |                                                                                                                                                                                                                                                                                                                     |
| Dated:                  June 14, 2007 | By:   | /s/                  Jeff                  Mills                                             |
|                                  |            | Jeff                  Mills, Director                                                                                                                                                                                                                                                                                    |

----

**DigitalTown,        Inc.**

**(formerly        BDC Capital, Inc.) **

**CONSOLIDATED        FINANCIAL STATEMENTS**

**FEBRUARY        28, 2007 AND 2006**

----

**REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

----

| **ASSETS**                                                                                                                                                                                                                                                       |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                             |   | February                    28,2007 |   |   | February                    28,2006Retrospectivelyadjusted |   |
|                                                                                                                                                                                                                                                             |   |   |   |   |   |   |
| Current                    assets:                                                                                                                                                                                                                               |   |   |   |   |   |   |
| Cash                                                                                                                                                                                                                                                             |   | $ | 8,933 |   |   | $ | 17,765 |   |
| Other                    receivable                                                                                                                                                                                                                              |   |   | 999 |   |   |   | - |   |
| Prepaid                    expense                                                                                                                                                                                                                               |   |   | - |   |   |   | 2,019 |   |
| Total                    current assets                                                                                                                                                                                                                          |   |   | 9,932 |   |   |   | 19,784 |   |
| Property                    and equipment, net                                                                                                                                                                                                                   |   |   | 1,579 |   |   |   | 2,764 |   |
| Intangible                    assets - domain names                                                                                                                                                                                                              |   |   | 441,558 |   |   |   | 217,495 |   |
| Total                    assets                                                                                                                                                                                                                                  |   | $ | 453,069 |   |   | $ | 240,043 |   |
|                                                                                                                                                                                                                                                             |   |
| **LIABILITIES                    AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                      |   |
| Current                    liabilities:                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Accounts                    payable                                                                                                                                                                                                                              |   | $ | 137,144 |   |   | $ | 10,664 |   |
| Advances                    from stockholders                                                                                                                                                                                                                    |   |   | 16,354 |   |   |   | 798 |   |
| Accrued                    expenses:                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Accrued                    payroll                                                                                                                                                                                                                               |   |   | 32,169 |   |   |   | - |   |
| Accrued                    interest                                                                                                                                                                                                                              |   |   | 9,476 |   |   |   | 3,876 |   |
| Deferred                    officer compensation                                                                                                                                                                                                                 |   |   | 18,865 |   |   |   | - |   |
| Notes                    payable - stockholder                                                                                                                                                                                                                   |   |   | 70,000 |   |   |   | - |   |
| Total                    current liabilities                                                                                                                                                                                                                     |   |   | 284,008 |   |   |   | 15,338 |   |
| Notes                    payable - stockholder                                                                                                                                                                                                                   |   |   | - |   |   |   | 70,000 |   |
| Total                    liabilities                                                                                                                                                                                                                             |   |   | 284,008 |   |   |   | 85,338 |   |
|                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Commitments                    and contingencies                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Stockholders’                    equity:                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Preferred                    stock, $.01 par value, 20,000,000 shares authorized, none and                    20,000,000                    issued and outstanding at February 28, 2007 and 2006,                    respectively                                |   |   | - |   |   |   | 200,000 |   |
| Common                    stock, $.01 par value, 2,000,000,000 shares authorized, 25,701,500                    and                    5,701,500 shares issued and outstanding at February 28, 2007                    and 2006,                    respectively |   |   | 257,010 |   |   |   | 57,010 |   |
| Additional                    paid-in-capital                                                                                                                                                                                                                    |   |   | 14,521,673 |   |   |   | 9,368,100 |   |
| Subscription                    receivable                                                                                                                                                                                                                       |   |   | (2,947,470 | ) |   |   | (3,550,000 | ) |
| Accumulated                    deficit                                                                                                                                                                                                                           |   |   | (11,662,152 | ) |   |   | (5,920,405 | ) |
| Total                    stockholders’ equity                                                                                                                                                                                                              |   |   | 169,061 |   |   |   | 154,705 |   |
| Total                    liabilities and stockholders’ equity                                                                                                                                                                                              |   | $ | 453,069 |   |   | $ | 240,043 |   |

----

|                                                                            |   | Year                  Ended        |       |
|---------------------------------------------------------------------------------|--------|------------------------------------|------------|
|                                                                            |   | February                  28, 2007 |       |
|                                                                            |   |                               |       |
| Operating                  expenses:                                            |   |                               |       |
| Selling,                  general and administrative expenses                   |   | $                                  | 5,740,928  |   |
|                                                                            |   |                               |       |   |
| Loss                  from operations                                           |   |                               | (5,740,928 | ) |
|                                                                            |   |                               |       |   |
| Other                  income (expense):                                        |   |                               |       |   |
| Interest                  expense                                               |   |                               | (5,600     | ) |
| Other                  income                                                   |   |                               | 4,781      |   |
| Total                  other income (expense)                                   |   |                               | (819       | ) |
|                                                                            |   |                               |       |   |
| Net                  loss                                                       |   | $                                  | (5,741,747 | ) |
|                                                                            |   |                               |       |   |
|                                                                            |   |                               |       |   |
|                                                                            |   |                               |       |   |
| Loss                  per common share - basic and diluted                      |   | $                                  | (0.42      | ) |
|                                                                            |   |                               |       |   |
| Weighted                  average common shares outstanding - basic and diluted |   |                               | 13,537,116 |   |

----

|                                                                                                                                                                                      |   | **Preferred                    Stock** |        |   | **Common                    Stock** |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-------------|--------|-------------------------------------|--------|----------|------------|--------|--------|------------|--------|--------|------------------------------------------------------------------|---------|--------|--------------------------------|--------|
|                                                                                                                                                                                      |   | **Series                    A Shares** |        |   | **Amount**                          |   |     | **Shares** |   |   | **Amount** |   |   | **Additional                    Paid-In ** **Capital** |    |   | **Subscription****Receivable** |   |   | **Accumulated****Deficit** |   |   | **Total** |   |
| Balance                    February 28, 2005                                                                                                                                              |   |                                   | 393,900     |   |                                | $      | 39,390   |       |   |   | 93,606     |   |   | $                                                                | 931     |   |                           | $      | 4,831,643 |   |   |   | - |   |   | $ | (4,063,928 | ) |   | $ | 808,036 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt                    to equity conversion, including interest                                                                                                                          |   |                                   | -           |   |                                |   | -        |       |   |   | 650,447    |   |   |                                                             | 6,505   |   |                           |   | 481,330 |   |   |   | - |   |   |   | - |   |   |   | 487,835 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OID                    costs on convertible debentures                                                                                                                                    |   |                                   | -           |   |                                |   | -        |       |   |   | -          |   |   |                                                             | -       |   |                           |   | 340,000 |   |   |   | - |   |   |   | - |   |   |   | 340,000 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued in subscription agreements                                                                                                                                |   |                                   | -           |   |                                |   | -        |       |   |   | 4,811,709  |   |   |                                                             | 48,117  |   |                           |   | 3,560,665 |   |   |   | (3,608,782 | ) |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Payment                    received on subscription agreements                                                                                                                            |   |                                   | -           |   |                                |   | -        |       |   |   | -          |   |   |                                                             | -       |   |                           |   | - |   |   |   | 58,782 |   |   |   | - |   |   |   | 58,782 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                    stock issued                                                                                                                                                    |   |                                   | -           |   |                                |   | -        |       |   |   | 145,737    |   |   |                                                             | 1,457   |   |                           |   | 107,846 |   |   |   | - |   |   |   | - |   |   |   | 109,303 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    dividend rescinded                                                                                                                                               |   |                                   | (393,900    | )      |                                |   | (39,390  | )          |   |   | -          |   |   |                                                             | -       |   |                           |   | 39,390 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt                    converted into preferred stock                                                                                                                                    |   |                                   | 14,777,390  |   |                                |   | 147,774  |       |   |   | -          |   |   |                                                             | -       |   |                           |   | 7,226 |   |   |   | - |   |   |   | - |   |   |   | 155,000 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred                    stock issued                                                                                                                                                 |   |                                   | 5,222,610   |   |                                |   | 52,226   |       |   |   | -          |   |   |                                                             | -       |   |                           |   | - |   |   |   | - |   |   |   | - |   |   |   | 52,226 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss as a business development company                                                                                                                             |   |                                   | -           |   |                                |   | -        |       |   |   | -          |   |   |                                                             | -       |   |                           |   | - |   |   |   | - |   |   |   | (1,059,421 | ) |   |   | (1,059,421 | ) |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retrospective                    adjustment for accounting change due to un-election as a business                    development company (see note 2)                                    |   |                                   | -           |   |                                |   | -        |       |   |   | -          |   |   |                                                             | -       |   |                           |   | - |   |   |   | - |   |   |   | (797,056 | ) |   |   | (797,056 | ) |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    February 28, 2006 (retrospectively adjusted)                                                                                                                   |   |                                   | 20,000,000  |   |                                |   | 200,000  |       |   |   | 5,701,500  |   |   |                                                             | 57,010  |   |                           |   | 9,368,100 |   |   |   | (3,550,000 | ) |   |   | (5,920,405 | ) |   |   | 154,705 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Payment                    received on subscription agreements                                                                                                                            |   |                                   | -           |   |                                |   | -        |       |   |   | -          |   |   |                                                             | -       |   |                           |   | - |   |   |   | 602,530 |   |   |   | - |   |   |   | 602,530 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pay                    finders fee on common stock issued                                                                                                                                 |   |                                   | -           |   |                                |   | -        |       |   |   | -          |   |   |                                                             | -       |   |                           |   | (20,000 | ) |   |   | - |   |   |   | - |   |   |   | (20,000 | ) |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred                    stock converted to common stock on a 1 for 1 share basis, both                    common and                    preferred par value stated at $.01 per share |   |                                   | (20,000,000 | )      |                                |   | (200,000 | )          |   |   | 20,000,000 |   |   |                                                             | 200,000 |   |                           |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    based compensation                                                                                                                                               |   |                                   | -           |   |                                |   | -        |       |   |   | -          |   |   |                                                             | -       |   |                           |   | 5,173,573 |   |   |   | - |   |   |   | - |   |   |   | 5,173,573 |   |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss as an operating company                                                                                                                                       |   |                                   | -           |   |                                |   | -        |       |   |   | -          |   |   |                                                             | -       |   |                           |   | - |   |   |   | - |   |   |   | (5,741,747 | ) |   |   | (5,741,747 | ) |
|                                                                                                                                                                                      |   |                                   |        |   |                                |   |     |       |   |   |       |   |   |                                                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    February 28, 2007                                                                                                                                              |   |                                   | -           |   |                                |   | -        |       |   |   | 25,701,500 |   |   |                                                             | 257,010 |   |                           |   | 14,521,673 |   |   | $ | (2,947,470 | ) |   | $ | (11,662,152 | ) |   | $ | 169,061 |   |

----

**CONSOLIDATED          STATEMENT OF CASH FLOWS**

|                                                                                                                                                                                                                             |   | **Year                    ended****February                    28,****2007** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|------------|
| CASH                    FLOWS FROM OPERATING ACTIVITIES:                                                                                                                                                                         |   |                                                                         |       |
| Net                    loss                                                                                                                                                                                                      |   | $                                                                            | (5,741,747 | ) |
| Adjustments                    to reconcile net loss to net cash flows from operating                    activities:                                                                                                             |   |                                                                         |       |   |
| Depreciation                                                                                                                                                                                                                     |   |                                                                         | 1,185      |   |
| Stock                    based compensation expense                                                                                                                                                                              |   |                                                                         | 5,173,573  |   |
| Changes                    in operating assets and liabilities:                                                                                                                                                                  |   |                                                                         |       |   |
| Other                    receivables                                                                                                                                                                                             |   |                                                                         | (999       | ) |
| Prepaid                    expenses                                                                                                                                                                                              |   |                                                                         | 2,019      |   |
| Accounts                    payable                                                                                                                                                                                              |   |                                                                         | 126,480    |   |
| Accrued                    expenses:                                                                                                                                                                                             |   |                                                                         |       |   |
| Accrued                    payroll                                                                                                                                                                                               |   |                                                                         | 32,169     |   |
| Accrued                    interest                                                                                                                                                                                              |   |                                                                         | 5,600      |   |
| Deferred                    officer compensation                                                                                                                                                                                 |   |                                                                         | 18,865     |   |
|                                                                                                                                                                                                                             |   |                                                                         |       |   |
| Net                    cash used in operating activities                                                                                                                                                                         |   |                                                                         | (382,855   | ) |
|                                                                                                                                                                                                                             |   |                                                                         |       |   |
| CASH                    FLOWS FROM INVESTING ACTIVITIES:                                                                                                                                                                         |   |                                                                         |       |   |
| Purchases                    of intangible assets - domain names                                                                                                                                                                 |   |                                                                         | (224,063   | ) |
|                                                                                                                                                                                                                             |   |                                                                         |       |   |
| Net                    cash used in investing activities                                                                                                                                                                         |   |                                                                         | (224,063   | ) |
|                                                                                                                                                                                                                             |   |                                                                         |       |   |
| CASH                    FLOWS FROM FINANCING ACTIVITIES:                                                                                                                                                                         |   |                                                                         |       |   |
| Advances                    from officer/stockholder                                                                                                                                                                             |   |                                                                         | 15,556     |   |
| Payments                    received on stockholder subscription receivables net of $20,000 in                    transaction costs for the subscription offering initiated in                    fiscal                    2006 |   |                                                                         | 582,530    |   |
|                                                                                                                                                                                                                             |   |                                                                         |       |   |
| Net                    cash provided by financing activities                                                                                                                                                                     |   |                                                                         | 598,086    |   |
|                                                                                                                                                                                                                             |   |                                                                         |            |   |
| Net                    change in cash and cash equivalents                                                                                                                                                                       |   |                                                                         | (8,832     | ) |
| Cash                    and cash equivalents, beginning of year                                                                                                                                                                  |   |                                                                         | 17,765     |   |
| Cash                    and cash equivalents, end of year                                                                                                                                                                        |   | $                                                                            | 8,933      |   |
|                                                                                                                                                                                                                             |   |                                                                         |            |   |
| SUPPLEMENTAL                    DISCLOSURES OF CASH FLOW INFORMATION:                                                                                                                                                            |   |                                                                         |       |   |
| Cash                    payments for interest                                                                                                                                                                                    |   | $                                                                            | -          |   |

----

**DigitalTown,          Inc.**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

**Years          Ended February 28, 2007 and 2006**

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

*Nature          of Business*

*Principles          of Consolidation*

----

*Use          of Estimates*

*Fair          Value of Financial Instruments*

*Revenue          Recognition*

----

*Cash          and Cash Equivalents*

*Intangible          Assets - Domain Names*

*Property          and Equipment *

*Long-Lived          Assets*

*Income          Taxes*

*Stock-Based          Compensation *

----

*Comprehensive          Income (Loss)*

*Net          Loss Per Common Share*

*Recently          Issued Accounting Pronouncements*

----

*Cash          Deposits in Excess of Federally Insured Limits*

*Advertising*

**Note          2. **
**Withdrawal          of Election to be Regulated as a Business Development          Company**
*** ***

| Adjust                    investment in BDC Partners, Inc. from fair value to historical                    cost                    values |   | $      | (607,597 | ) |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|---|
| Accumulated                    deficit from BDC Partners, Inc.                                                                             |   |   | (189,459 | ) |
| Net                    adjustment                                                                                                          |   | $      | (797,056 | ) |

**Note          3. Property and Equipment**

|                                              |   | **2007** |     | **2006** |   |
|---------------------------------------------------|--------|----------|----------|----------|--------|
| Office                    equipment and furniture |   | $        | 473,220  |     | $      | 473,220 |   |
| Less                    accumulated depreciation  |   |     | (457,003 | )        |   | (455,818 | ) |
| Less                    impairment of equipment   |   |     | (14,638  | )        |   | (14,638 | ) |
|                                              |   | $        | 1,579    |     | $      | 2,764 |   |

----

**Note          4. Debt Financing**

**Note          5. Income Taxes**

|                                                      |   | **2007** | ** ** | **2006** |   |
|-----------------------------------------------------------|--------|----------|------------|----------|--------|
| Deferred                    tax assets:                   |   |     |       |     |   |
| Stock                    compensation                     |   | $        | 1,966,000  |     | $      | - |   |
| Net                    operating loss carryforwards       |   |     | 1,939,000  |     |   | 1,724,000 |   |
| Total                    deferred tax assets              |   |     | 3,905,000  |     |   | 1,724,000 |   |
|                                                      |   |     |       |     |   |   |   |
| Deferred                    tax liabilities:         |   |     |       |     |   |   |   |
| Unrealized                    appreciation on investments |   |     | -          |     |   | (207,000 | ) |
| Net                    deferred tax assets                |   |     | 3,905,000  |     |   | 1,517,000 |   |
| Valuation                    allowance                    |   |     | (3,905,000 | )        |   | (1,517,000 | ) |
| Net                    deferred tax assets                |   | $        | -          |     | $      | - |   |

|                                                         |   | **2007**      |   | **2006** |   |
|--------------------------------------------------------------|--------|---------------|--------|----------|--------|
| 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%     |   |

**Note          6. Notes Payable - Stockholder**

----

**Note          7. Stockholders Equity**

**Note          8. Stock Options**

----

| Risk-free                    interest rate          | 4.75%                      |
|-----------------------------------------------------|----------------------------|
| Expected                    life of options granted | 5                    years |
| Expected                    volatility factor       | 380%                       |
| Expected                    dividend yield          | None                       |

|                                                              |   | Number                    of Options |      | Weighted                    Average Exercise Price |   | Weighted                    Average Remaining Contract Life |   | Aggregate                    Intrinsic Value (1) |   |
|-------------------------------------------------------------------|--------|--------------------------------------|-----------|----------------------------------------------------|--------|-------------------------------------------------------------|--------|--------------------------------------------------|--------|
| Options                    outstanding February 28, 2006          |   |                                 | 422,200   |                                               | $      | 1.04                                                        |   |                                             | -      |   |   | - |   |
| Granted                                                           |   |                                 | 3,125,000 |                                               |   | 1.725                                                       |   |                                             | -      |   |   | - |   |
| Canceled                    or expired                            |   |                                 | (422,200  | )                                                  |   | (1.04                                                       | )      |                                             | -      |   |   | - |   |
| Exercised                                                         |   |                                 | -         |                                               |   | -                                                           |   |                                             | -      |   |   | - |   |
| Options                    outstanding - February 28, 2007   |   |                                 | 3,125,000 |                                               | $      | 1.725                                                       |   |                                             | 4.50   |   | $ | 78,125 |   |
| Exercisable                    at February 28, 2007          |   |                                 | 2,990,000 |                                               | $      | 1.725                                                       |   |                                             | 4.50   |   | $ | 74,750 |   |

**Note          9. Related Party Transactions**

----

| Fiscal                    years ending: |   |   |    |
|-----------------------------------------|--------|--------|---------|
|                                    |   |   |    |
| 2008                                    |   | $      | 38,425  |   |
| 2009                                    |   |   | 31,800  |   |
| 2010                                    |   |   | 31,800  |   |
| 2011                                    |   |   | 31,800  |   |
| 2012                                    |   |   | 23,850  |   |
|                                    |   | $      | 157,675 |   |

**Note          10. Commitments and Contingencies**

**Note          11. Subscriptions Receivable**

**Note          12. Prior Period Financial Statement Presentation**

|   | · | Balance                    Sheet as of February 28, 2006 |
|--------|--------|----------------------------------------------------------|

|   | · | Statement                    of Operations for the year ended February 28,                    2006 |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | Statement                    of Cash Flows for the year ended February 28,                    2006 |
|--------|--------|----------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                |   | As                      a Business DevelopmentCompany |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------|------------|
|                      **ASSETS**                                                                                                                                                                |   | February                      28,2006                 |       |
| Current                      assets:                                                                                                                                                                |   |                                                  |       |
| Cash                                                                                                                                                                                                |   | $                                                     | 15,346     |   |
| Prepaid                      expense                                                                                                                                                                |   |                                                  | 2,019      |   |
| Total                      current assets                                                                                                                                                           |   |                                                  | 17,365     |   |
| Property                      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  |   |
| Total                      assets                                                                                                                                                                   |   | $                                                     | 1,031,265  |   |
|                                                                                                                                                                                                |   |                                                  |       |   |
| **LIABILITIES                      AND STOCKHOLDERS EQUITY**                                                                                                                                        |   |                                                  |       |   |
| Current                      liabilities:                                                                                                                                                           |   |                                                  |       |   |
| Accounts                      payable                                                                                                                                                               |   | $                                                     | 4,420      |   |
| Advance                      from stockholder                                                                                                                                                       |   |                                                  | 798        |   |
| Accrued                      liabilities                                                                                                                                                            |   |                                                  | 3,876      |   |
| Due                      to BDC Partners, Inc.                                                                                                                                                      |   |                                                  | 410        |   |
| Total                      current liabilities                                                                                                                                                      |   |                                                  | 9,504      |   |
| Notes                      payable - related party                                                                                                                                                  |   |                                                  | 70,000     |   |
| Total                      liabilities                                                                                                                                                              |   |                                                  | 79,504     |   |
| Commitments                      and contingencies                                                                                                                                                  |   |                                                  |       |   |
| Stockholders’                      equity:                                                                                                                                                    |   |                                                  |       |   |
| Preferred                      stock, $.01 par value, 20,000,000 shares authorized, 20,000,000                      and                      3,939,000 issued and outstanding, respectively         |   |                                                  | 200,000    |   |
| Common                      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  |   |
| Additional                      paid-in-capital                                                                                                                                                     |   |                                                  | 5,149,389  |   |
| Subscription                      receivable                                                                                                                                                        |   |                                                  | (3,550,000 | ) |
| Accumulated                      deficit                                                                                                                                                            |   |                                                  | (5,123,349 | ) |
| Total                      stockholders’ equity                                                                                                                                               |   |                                                  | 951,761    |   |
| Total                      liabilities and stockholders’ equity                                                                                                                               |   | $                                                     | 1,031,265  |   |

----

|                                                                                                      |   | As                      a Business DevelopmentCompany                |       |
|-----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|------------|
|                                                                                                      |   | Year                      EndedFebruary                      28,2006 |       |
|                                                                                                      |   |                                                                 |       |
| Investment                      income                                                                    |   | $                                                                    | 823        |   |
|                                                                                                      |   |                                                                 |       |   |
| Operating                      Expenses:                                                                  |   |                                                                 |       |   |
| Professional                      fees                                                                    |   |                                                                 | 79,790     |   |
| Administrative                      expenses                                                              |   |                                                                 | 147,816    |   |
| Rent                                                                                                      |   |                                                                 | 4,500      |   |
| Other                                                                                                     |   |                                                                 | 18,250     |   |
| Interest                      expense                                                                     |   |                                                                 | 809,888    |   |
| Total                      Operating expenses                                                             |   |                                                                 | 1,060,244  |   |
| Net                      investment loss                                                                  |   |                                                                 | (1,059,421 | ) |
|                                                                                                      |   |                                                                 |       |   |
| Net                      change in unrealized appreciation on investment                                  |   |                                                                 | -          |   |
| Net                      increase (decrease) in net assets resulting from                      operations |   | $                                                                    | (1,059,421 | ) |
|                                                                                                      |   |                                                                 |       |   |
| Income                      (loss) per common share - basic                                               |   | $                                                                    | (0.82      | ) |
|                                                                                                      |   |                                                                 |       |   |
| Income                      (loss) per common share -diluted                                              |   | $                                                                    | (0.82      | ) |
|                                                                                                      |   |                                                                 |       |   |
| Weighted                      average shares outstanding - basic                                          |   |                                                                 | 1,291,556  |   |
|                                                                                                      |   |                                                                 |       |   |
| Weighted                      average shares outstanding - diluted                                        |   |                                                                 | 1,291,556  |   |

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|                                                                                                                                                                          |   | As                    a Business DevelopmentCompany              |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|------------|
|                                                                                                                                                                          |   | Year                    EndedFebruary                    28,2006 |       |
| CASH                    FLOWS FROM OPERATING ACTIVITIES:                                                                                                                      |   |                                                             |       |
| Net                    loss from operations                                                                                                                                   |   | $                                                                | -          |   |
| Net                    increase (decrease) in net assets resulting from operations as                    a business                    development company                    |   |                                                             | (1,059,421 | ) |
| 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    |   |
| Administrative                    fees paid by issuance of convertible debt                                                                                                   |   |                                                             | 90,000     |   |
| Net                    change in unrealized appreciation on investments                                                                                                       |   |                                                             | -          |   |
| Assets                    transferred to BDC Partners, Inc.                                                                                                                   |   |                                                             | -          |   |
| Changes                    in operating assets and liabilities:                                                                                                               |   |                                                             |       |   |
| Accounts                    receivable                                                                                                                                        |   |                                                             | -          |   |
| Inventories                                                                                                                                                                   |   |                                                             |       |   |
| Prepaid                    expenses                                                                                                                                           |   |                                                             | (2,019     | ) |
| Accounts                    payable                                                                                                                                           |   |                                                             | 4,420      |   |
| Accrued                    liabilities                                                                                                                                        |   |                                                             | 24,076     |   |
| Investment                    in BDC Partners, Inc.                                                                                                                           |   |                                                             | (338,900   | ) |
| Due                    to BDC Partners, Inc.                                                                                                                                  |   |                                                             | (1,690     | ) |
|                                                                                                                                                                          |   |                                                             |       |   |
| Net                    cash used in operating activities                                                                                                                      |   |                                                             | (507,628   | ) |
|                                                                                                                                                                          |   |                                                             |       |   |
| CASH                    FLOWS FROM FINANCING ACTIVITIES:                                                                                                                      |   |                                                             |       |   |
| Net                    proceeds (payments) from stockholder                                                                                                                   |   |                                                             | 798        |   |
| Payments                    received on stockholder subscription receivable                                                                                                   |   |                                                             | 58,782     |   |
| Proceeds                    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    |   |
| Net                    cash provided by financing activities                                                                                                                  |   |                                                             | 262,795    |   |
|                                                                                                                                                                          |   |                                                             |            |   |
| Net                    change in cash and cash equivalents for the period                                                                                                     |   |                                                             | (244,833   | ) |
| Cash                    and cash equivalents at beginning of period                                                                                                           |   |                                                             | 260,179    |   |
| Cash                    and cash equivalents at end of period                                                                                                                 |   | $                                                                | 15,346     |   |
|                                                                                                                                                                          |   |                                                             |            |   |
| SUPPLEMENTAL                    DISCLOSURES OF CASH FLOW INFORMATION:                                                                                                         |   |                                                             |       |   |
| Cash                    payments for interest                                                                                                                                 |   | $                                                                | 9,906      |   |
|                                                                                                                                                                          |   |                                                             |       |   |
| SUPPLEMENTAL                    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                                                                                                                       |   | $                                                                | -          |   |
| Debt                    to equity conversion, including accrued interest                                                                                                      |   | $                                                                | 642,835    |   |

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