U.S.
        SECURITIES AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 Form
        10-QSB
 
 (Mark
        One)
  |
                  X
                  |
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
  For
        the
        quarterly period ended: November 30, 2005
  
 |__|
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        transition period from _______________
 
 Commission
        file number: *000-27225*
  
 BDC Capital, Inc.
 (Name
        of
        small business issuer in its charter)
 
 Minnesota
              41-1427445(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)11974
                  Portland Avenue, Burnsville, Minnesota
              55337(Address
                  of principal executive offices)
              (Zip
                  Code)Issuer's
                  telephone number:(952)
                  890-2362
 
 Check
        whether the issuer (1) has filed all reports required to be filed by Section
        13
        or 15(d) of the Exchange Act during the past 12 months (or for such shorter
        period that the registrant was required to file such reports), and (2) has
        been
        subject to such filing requirements for the past 90 days.
 
 Yes
              X
              
              No
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). 
 Yes
                
                
                No
                X
  State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date 423,882,667 shares of Common Stock, as
        of
        January 2, 2006.
 Transitional
        Small Business Disclosure Format?
 Yes
                
                
                No
                X
 
  
  
 Preferred
        Stock
 (Title
        of
        Class)
  The
        Series A Preferred Stock (Series A Preferred) is non-interest bearing, does
        not
        have voting rights and is not entitled to receive dividend. Each share of
        Series
        A Preferred issued can be converted into common stock on a 1:1 basis after
        a
        twelve month period. Should a liquidation event occur, the Series A Preferred
        automatically converts into common stock based on the foregoing formula.
        Further, the Series A Preferred is not affected by forward or reverse splits
        on
        the Corporation's common stock or other adjustments to the Corporation's
        capital
        structure. Finally, Series A Preferred is entitled to elect a majority of
        the
        Corporation's board of directors at all times, provided that a majority of
        the
        board of directors is, at all times, independent.
   The
        Corporation has currently 10,000,000 Series A Preferred issued and outstanding
        as of January 2, 2006.
                     
  
 
 
 
 
 TABLE
        OF
        CONTENTS
 
  PART
                  I
              
              1Item
                  1.
              Financial
                  Statements
              1Item
                  2.
              Management’s
                  Discussion and Analysis and Plan of Operation
              15Item
                  3.
              Controls
                  and Procedures
              18PART
                  II
              
              18Item
                  1.
              Legal
                  Proceedings
              18Item
                  2.
              Unregistered
                  sales of Equity Securities and Use of Proceeds
              18Item
                  3.
              Defaults
                  Upon Senior Securities
              18Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              18Item
                  5.
              Other
                  Information
              19Item
                  6.
              Exhibits
                  and Reports on Form 8-K
              19
 
    
  
  
 
 PART
        I
 
 ITEM
        1.  FINANCIAL STATEMENTS
 
 PageFinancial
                  StatementsBalance
                  Sheets
              2Statements
                  of Operations
              3Statements
                  of Cash Flows
              5Notes
                  to Financial Statements
              7
              
  1
 
 
 BDC
        Capital, Inc.
 (formerly
        eNetpc, Inc.)
 BALANCE
        SHEETS (UNAUDITED)
 November
        30, 2005 and February 28, 2005
  **ASSETS**November
                  30,
                2005
              
              February
                  28,
                2005**Assets**Cash
              
              $
              6,140
              
              $
              260,179Prepaid
                  expense
              
              
              2,778Total
                  Current Assets
              
              
              8,918
              
              
              260,179Investment
                  in securities, at fair value (cost of $388,303 and $67,403 at November
                  30,
                  2005 and February 28, 2005, respectively)
              
              
              995,900
              
              
              675,000Property
                  and equipment, net
              
              
              -
              
              
              -Total
                  Assets
              
              $
              1,004,818
              
              $
              935,179**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Liabilities**Accounts
                  payable
              
              $
              3,596
              
              $
              -Related
                  party convertible debentures, net of original issue discount of
                  $31,939
                  and $166,874
              
              
              13,758
              
              
              18,675Convertible
                  debentures, net of original issue discount of $190,087 and
                  $269,032
              
              
              101,831
              
              
              99,330Accrued
                  liabilities
              
              
              27,342
              
              
              7,038Due
                  to BDC Partners, Inc.
              
              
              410
              
              
              2,100Total
                  Current Liabilities
              
              
              146,937
              
              
              127,143Related
                  party notes payable
              
              
              70,000
              
              
              -Total
                  Liabilities
              
              
              216,937
              
              
              127,143**Stockholders’
                  Equity**Preferred
                  stock, $.01 par value, 20,000,000 shares authorized, 10,000,000
                  and
                  3,939,000 issued and outstanding at November 30, 2005 and February
                  28,
                  2005, respectively
              
              
              104,390
              
              
              39,390Common
                  stock, $.01 par value, 2,020,000,000 shares authorized 37,898,473
                  and
                  6,980,117 shares issued and outstanding at November 30, 2005 and
                  February
                  28, 2005, respectively
              
              
              378,985
              
              
              69,801Subscription
                  receivable
              
              
              (2,167
              )
              
              -Additional
                  paid-in-capital
              
              
              5,114,999
              
              
              4,762,773Accumulated
                  deficit
              
              
              (4,808,326
              )
              
              (4,063,928
              )Total
                  Stockholders’ Equity
              
              
              787,881
              
              
              808,036Total
                  Liabilities and Stockholders’ Equity
              
              $
              1,004,818
              
              $
              935,179
 
  The
        accompanying notes are an integral part of these financial
        statements
 
  2
   BDC
        Capital, Inc.
 (formerly
        eNetpc, Inc.)
 STATEMENT
        OF OPERATIONS (UNDAUDITED)
 
 As
                  a Business Development Company
              
              As
                  a Business Development CompanyThree
                  months ended November 30,
                2005
              
              Nine
                  months ended November 30,
                2005**Investment
                  income**
              
              $
              2
              
              $
              821**Operating
                  Expenses:**Professional
                  fees
              
              
              11,045
              
              
              73,687Administrative
                  expenses
              
              
              47,181
              
              
              108,094Rent
              
              
              1,125
              
              
              3,375Printing
                  and reproduction
              
              
              -
              
              
              51Other
              
              
              1,941
              
              
              5,580Interest
                  expense
              
              
              108,592
              
              
              554,432Total
                  Operating expenses
              
              
              169,884
              
              
              745,219**Net
                  investment loss**
              
              
              (169,882
              )
              
              (744,398
              )**Net
                  change in unrealized appreciation on investment**
              
              
              -
              
              
              -**Net
                  decrease in net assets resulting from operation**
              
              $
              (169,882
              )
              $
              (744,398
              )Loss
                  per common share - basic and diluted
              
              $
              (.00
              )
              $
              (.02
              )Weighted
                  average shares outstanding - basic and diluted
              
              
              49,976,187
              
              
              32,858,173
   
 The
        accompanying notes are an integral part of these financial
        statements.
   
  3
 
 
 BDC
        Capital, Inc.
 (formerly
        eNetpc, Inc.)
 STATEMENTS
        OF OPERATIONS (UNAUDITED)
  Prior
                  to becoming a
                Business
                  Development CompanyThree
                  months ended
                November
                  30,
                2004
              
              
              Nine
                  months ended
                November
                  30,
                2004Revenues
              
              $
              10,441
              
              $
              111,409Cost
                  of sales
              
              
              9,191
              
              
              76,997Gross
                  profit
              
              
              1,250
              
              
              34,412Operating
                  ExpensesSelling,
                  general and administrative expenses
              
              
              116,586
              
              
              182,486Loss
                  from operations
              
              
              (115,336
              )
              
              (148,074
              )Interest
                  expense
              
              
              (18,841
              )
              
              (23,632
              )Net
                  loss
              
              $
              (134,177
              )
              $
              (171,706
              )Loss
                  per common share - basic and diluted
              
              $
              (.03
              )
              $
              (.04
              )Weighted
                  average shares outstanding - basic and diluted
              
              
              3,939,000
              
              
              3,939,000
   
 The
        accompanying notes are an integral part of these financial
        statements
 
   4
   **BDC
        Capital, Inc.**
 **(formerly
        eNetpc, Inc.)**
 
 **STATEMENTS
        OF CASH FLOWS**
  **As
                  a Business Development****Company**
              
              **Prior
                  to becoming a Business Development****Company****Nine
                    months ended**
                  **November
                    30,**
                  **2005**
              
              **Nine
                  months ended**
                **November
                  30,**
                **2004****CASH
                  FLOWS FROM OPERATING AND INVESTING ACTIVITIES**Net
                  loss
              
              $
              -
              
              $
              (171,706
              )Net
                  decrease in net assets resulting from operations as a business
                  development
                  company
              
              
              (744,398
              )Adjustments
                  to reconcile net assets resulting from operations and net loss
                  to net cash
                  used by operating activities:Depreciation
                  and amortization
              
              
              -
              
              
              -Amortization
                  of original issue discount
              
              
              523,879
              
              
              -Administrative
                  fees paid by issuance of convertible debt
              
              
              60,000
              
              
              -Accounts
                  receivable
              
              
              -
              
              
              19,099Inventories
              
              
              -
              
              
              (960
              )Prepaid
                  expenses
              
              
              (2,778
              )
              
              -Accounts
                  payable
              
              
              3,596
              
              
              24,266Accrued
                  liabilities
              
              
              20,647
              
              
              (856
              )Investment
                  in BDC Partners, Inc.
              
              
              (320,900
              )
              
              -Due
                  to BDC Partners, Inc.
              
              
              (1,690
              )
              
              -Net
                  cash provide used in operating and investing activities
              
              
              (461,644
              )
              
              (130,157
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Proceeds
                  from issuance of common stock
              
              
              109,303
              
              
              -Net
                  proceeds (payments) from due to stockholder
              
              
              -
              
              
              48,023Net
                  proceeds from subscription receivable
              
              
              56,615
              
              
              22,500Payments
                  made on convertible debentures
              
              
              (278,313
              )
              
              -Proceeds
                  from issuance of notes payable
              
              
              70,000
              
              
              50,000Payments
                  on notes payableProceeds
                  from issuance of convertible debentures
              
              
              250,000
              
              
              16,284Net
                  cash provided by financing activities
              
              
              207,605
              
              
              136,807**Net
                  change in cash and cash equivalents for the
                  period**
              
              
              (254,039
              )
              
              6,650**Cash
                  and cash equivalents at beginning of period**
              
              
              260,179
              
              
              9,683**Cash
                  and cash equivalents at end of period**
              
              $
              6,140
              
              $
              16,333**SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATION**:Cash
                  payments for interest
              
              $
              9,906
              
              
              -**SUPPLEMENTAL
                  SCHEDULE OF NONCASH INVESTING****AND
                  FINANCING ACTIVITIES:**Administrative
                  expenses paid via increase in convertible debt
              
              $
              60,000
              
              
              -Debt
                  to equity conversion, including accrued interest
              
              $
              248,325
              
              
              -Preferred
                  stock dividend rescinded
              
              $
              39,390
 
 The
        accompanying notes are an integral part of these financial
        statements.
 
  5
   **BDC
        Capital, Inc.**
 **(formerly
        eNetpc, Inc.)**
 
 **SCHEDULE
        OF INVESTMENTS**
 **November
        30, 2005**
 
 
 **Portfolio
                  Company**
              **Principal
                  business**
              **Investments**
              **Cost**
              **Fair
                  Value**BDC
                  Partners, Inc.
              Technology
              Equity
              $388,303
              $995,900
 
 
 BDC
        Partners, Inc is a private company founded in 2004 and is located in
        Minneapolis, MN. It is a wholly own subsidiary of BDC Capital, Inc. that
        has a
        unique, multidisciplinary technology process paired with an intellectual
        property revenue-focused business model.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  6
 
 
 **Note
        1. Nature of Business and Summary of Significant Accounting
        Policies** :
 
 **Nature
        of business** ***:***
 
 BDC
        Capital, Inc. (“The Company”) was formed as a Minnesota corporation on April 7,
        1982. It was incorporated under the name Command Small Computer Learning
        Center,
        Inc., a computer training company. In 1987, the Company changed its name
        to
        Command Electronics, Inc. In February 1995, the Company acquired CyberStar
        Computer Systems, a manufacturer and marketer of microcomputers and servers,
        and
        in 1997 it changed its name to CyberStar Computer Corporation. In 2000, the
        Company changed its name to eNetpc, Inc. In November of 2004 the Company
        changed
        its name to BDC Capital, Inc. The Company has engaged in the sale of computer
        components, development of software and resell of major computer brands.
        The
        names "BDC Capital, Inc.”, "we", "our" and "us" used in this report refer to BDC
        Capital, Inc.
  On
        December 10, 2004, the Company elected to be regulated as a business development
        company (BDC) as outlined in the Investment Company Act of 1940 by filing
        a Form
        NT-54A. As a BDC, the Company plans to focus on current opportunities available
        to this attractive business model.
  ***Investment
        Strategy:***
 
 BDC
        Capital, Inc. intends to build an investment portfolio consisting of revenue
        generating assets and emerging companies well positioned for future growth.
        A
        business development company is a unique kind of investment company that
        primarily focuses on investing in or lending to small private companies and
        making managerial assistance available to them. A business development company
        may use capital provided by public stockholders and from other sources to
        invest
        in growing small businesses.
 
 A
        business development company provides stockholders the ability to retain
        the
        liquidity of a publicly traded stock while sharing in the possible benefits
        of
        investing in privately owned small-and medium-sized companies.
  As
        a BDC,
        the Company is required to have at least 70% of its assets in portfolio
        companies.
 
 **A
        summary of the Company's significant accounting policies
        follows:**
 
 ***Conversion
        to Business Development Company***
 
 The
        financial statements include the statement of operations as a business
        development company under the Investment Company Act of 1940, as amended
        as well
        as the statement of operations for the comparable period as an operating
        company. BDC Capital converted to a business development company in December
        2004.
 
  7
  
 ***Cash
        and cash equivalents:***
 
 The
        Company considers all highly liquid debt instruments purchased with a maturity
        of three months or less to be cash equivalents. Cash on deposit in excess
        of
        FDIC and similar insurance coverage is subject to the usual banking risks
        of
        funds in excess of those limits.
  ***Valuation
        of Investments:***
 
 Value,
        as
        defined in Section 2(a)(41) of 1940 Act, is (i) the market price for those
        securities for which a market quotation is readily available and (ii) for
        all
        other securities and assets, fair value is as determined in good faith by
        the
        board of directors. Since there is typically no readily available market
        value
        for the Company’s privately held investments, the Company values substantially
        all of its investments at fair value as determined in good faith by the board
        of
        directors pursuant to a valuation policy and a consistent valuation process.
        At
        November 30, 2005, approximately 95% of the Company’s total assets represented
        investments of which approximately 100% are valued at fair value. Because
        of the
        inherent uncertainty of determining the fair value of investments that do
        not
        have a readily available market value, the fair value of the Company’s
        investments determined in good faith by the board of directors may differ
        significantly from the values that would have been used had a ready market
        existed for the investments, and the differences could be material.
  There
        is
        no single standard for determining fair value in good faith. As a result,
        determining fair value requires that judgment be applied to the specific
        facts
        and circumstances of each portfolio investment. The Company must determine
        the
        fair value of each individual investment on a quarterly basis. The Company
        records unrealized depreciation on investments when it believes that an
        investment has decreased in value, including where collection of a loan or
        realization of an equity security is doubtful. Conversely, the Company records
        unrealized appreciation if it believes that the underlying portfolio company
        has
        appreciated in value and, therefore, the Company’s investment has also
        appreciated in value, where appropriate.
  As
        a
        business development company, the Company invests primarily in illiquid
        securities including debt and equity securities of private companies. The
        Company’s investments are generally subject to some restrictions on resale and
        generally have no established trading market. Because of the type of investments
        that the Company makes and the nature of its business, the Company’s valuation
        process requires an analysis of various factors. The Company’s fair value
        methodology includes the examination of, among other things, the underlying
        portfolio company performance, financial condition and market changing events
        that impact valuation.
 
 With
        respect to private debt and equity securities, each investment is valued
        using
        industry valuation benchmarks, and, where appropriate, the value is assigned
        a
        discount reflecting the illiquid nature of the investment and/or the Company’s
        minority, non-control position. When an external event such as a purchase
        transaction, public offering, or subsequent equity sale occurs, the pricing
        indicated by the external event will be used to corroborate the Company’s
        private debt or equity valuation.
 
  8
  
 ***Investments
        in equity securities:***
 
 Under
        business development company accounting, all equity investments are carried
        at
        fair value with any adjustments recorded in the statement of operations,
        combined with adjustments in the fair value of investments in loans, as
        investment gains (losses)—unrealized.
 
 In
        accordance with Article 6 of Regulation S-X under the Securities Act of 1933
        and
        Securities Exchange Act of 1934, the Company does not consolidate portfolio
        company investments, including those in which it has a controlling
        interest.
 
 ***Income
        taxes:***
 
 Deferred
        taxes are provided on a liability method whereby deferred tax assets are
        recognized for deductible temporary differences and operating loss and tax
        credit carryforwards and deferred tax liabilities are recognized for taxable
        temporary differences. Temporary differences are the differences between
        the
        reported amounts of assets and liabilities and their tax basis. Deferred
        tax
        assets are reduced by a valuation allowance when, in the opinion of management,
        it is more likely than not that some portion or all of the deferred tax assets
        will not be realized. Deferred tax assets and liabilities are adjusted for
        the
        effects of changes in tax laws and rates on the date of the
        enactment.
  ***Stock-based
        employee compensation:***
 
 The
        Company follows Accounting Principles Board Opinion No. 25, Accounting for
        Stock
        Issued to Employees ("APB 25") and related interpretations in accounting
        for its
        stock options. Under APB 25, when the exercise price of stock options equals
        the
        market price of the underlying stock on the date of grant, no compensation
        expense is recognized. The Company has elected to follow the disclosure only
        provisions of Statement of Financial Accounting Standards No. 123, Accounting
        for Stock-Based Compensation ("Statement 123").
  Prior
        to
        February 29, 2004, all stock options issued to employees had vested. Since
        February 29, 2004 there have been no issuances of employee stock options.
 
 ***Net
        loss per share:***
 
 Basic
        loss per share is computed using the weighted average number of shares
        outstanding for the period, including preferred stock (note 5). Diluted loss
        per
        share is computed using the weighted average number of shares outstanding
        per
        share adjusted for the incremental shares attributed to outstanding stock
        options under the Company's stock option plans and stock purchase warrants
        and
        convertible debt. Incremental shares (none outstanding) attributable to the
        assumed exercise of stock options and stock purchase warrants for the three
        and
        nine months ended November 30, 2005, and the nine months ended November 30,
        2004
        were excluded from the computation of diluted earnings per share as their
        effect
        would be anti-dilutive. The diluted loss per share computation does not include
        potential incremental shares relating to the outstanding convertible debentures
        for the three and nine months ended November 30, 2005, as they would have
        been
        anti-dilutive. As of November 30, 2005, the number of potentially dilutive
        common shares was approximately 31,984,200.
 
  9
  
 ***Carrying
        value of financial instruments:***
 
 The
        carrying value of the Company's financial instruments approximates fair value
        at
        November 30, 2005 and February 28, 2005.
 
 ***Recently
        issued accounting pronouncements***
 
 In
        December 2004, the FASB issued SFAS No. 123(R) “Share-Based Payment”.
        SFAS 123(R) requires the recognition of compensation cost relating to
        share-based payment transactions in financial statements. That cost will
        be
        measured based on the fair value of the equity or liability instruments issued
        as of the grant date, based on the estimated number of awards that are expected
        to vest. SFAS 123(R) covers a wide range of share-based compensation
        arrangements including share options, restricted share plans, performance-based
        awards, share appreciation rights, and employee share purchase plans.
        Statement 123(R) replaces FASB Statement No. 123, “Accounting for
        Stock-Based compensation,” and supersedes APB Opinion No. 25, “Accounting
        for Stock Issued to Employees”. Statement 123(R) is effective for us
        beginning March 1, 2006. We are in the process of evaluating the impact of
        SFAS 123(R) on our financial position and results of
        operations.
 
 ***Estimates
        and assumptions:***
 
 The
        preparation of the financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and revenues and expenses during the reporting period.
        Significant estimates include valuation of private company investments, the
        lives of patent rights and equipment and the valuation of stock issued. Actual
        results could differ from these estimates.
 
 
 
  10
  
 **Note
        2. Property and Equipment, net:**
  **November
                  30, 2005**
              
              **February
                  28, 2005**Office
                  equipment and furniture
              
              $
              469,666
              
              $
              469,666Leasehold
                  improvements
              
              
              -
              
              
              37,270Production
                  equipment
              
              
              -
              
              
              61,515469,666
              
              
              568,451Less
                  accumulated depreciation
              
              
              455,028
              
              
              553,813Less
                  impairment of equipment
              
              
              14,638
              
              
              14,638$
              -
              
              $
              -
 
 Depreciation
        expense was $0 for the three and nine months ended November 30, 2005 and
        2004.
 
 **Note
        3. Convertible debentures:**
  The
        Company has issued convertible debentures totaling $799,322 and $519,322
        as of
        November 30, 2005 and February 28, 2005, bearing interest at 8.0% payable
        at
        maturity and are convertible at the Company’s current stock offering price which
        has been $.01 since December 1, 2004.  The debentures mature at various
        dates from April 1, 2005 through August 31, 2007. These debentures plus any
        accrued interest are convertible as of the date of issuance at the option
        of the
        Company or the debt holder. These debentures are subordinated to any bank
        financing. The application of the provisions of EITF 98-5, “Accounting for
        Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios,” and EITF 00-27, “Application of Issue 98-5 to
        Certain Convertible Instruments” resulted in the calculation of an embedded
        beneficial conversion feature which is required to be treated as a discount
        to
        the debt. The value of the beneficial conversion feature was $799,322 and
        $519,322 as of November 30, 2005 and February 28, 2005. Amortization of the
        beneficial conversion feature into interest expense for the three and nine
        months ended November 30, 2005 was $58,585 and $523,879, respectively. As
        of
        November 30, 2005, $204,664 of the discount remained to be amortized into
        interest expense over the remaining life of the debt.
  
 The
        Company has also issued long-term convertible preferred debentures with a
        majority stockholder totaling $65,000, net of original issue discount of
        $58,085
        as of February 28, 2005, bearing interest at 8.0% payable at maturity. This
        debenture plus any accrued interest is convertible as of the date of issuance
        at
        the option of the Company or the debt holder. These debentures are subordinated
        to any bank financing. The application of the provisions of EITF 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features
        or
        Contingently Adjustable Conversion Ratios,” and EITF 00-27, “Application of
        Issue 98-5 to Certain Convertible Instruments” resulted in the calculation of an
        embedded beneficial conversion feature which is required to be treated as
        a
        discount to the debt. The value of the beneficial conversion feature was
        $65,000. This debenture was converted into preferred stock on April
        2005.
 
  11
  
 
 During
        the nine months ended November 30, 2005, the Company issued long term
        convertible preferred debentures with a majority shareholder for services
        provided to the Company totaling $60,000 of which 42,226 has been converted
        into
        3,939,000 shares of preferred stock on October 13, 2005. The remaining $17,774
        of convertible debt is net of original issue discount of $17,362 as of November
        30, 2005, bearing interest at 8% at maturity. The debentures mature in November
        2007. This debenture plus any accrued interest is convertible as of the date
        of
        issuance at the option of the Company or the debt holder. These debentures
        are
        subordinated to any bank financing. The application of the provisions of
        EITF
        98-5, “Accounting for Convertible Securities with Beneficial Conversion Features
        or Contingently Adjustable Conversion Ratios,” and EITF 00-27, “Application of
        Issue 98-5 to Certain Convertible Instruments” resulted in the calculation of an
        embedded beneficial conversion feature which is required to be treated as
        an
        additional discount to the debt. The value of the beneficial conversion feature
        was $60,000. Amortization of the beneficial conversion feature into interest
        expense for the three and nine months ended November 30, 2005 was $41,355
        and
        $42,638, respectively.
 
 Future
        maturities of all remaining convertible debentures are as follows for the
        years
        ending November 30:
 
 2006
              
              $
              -2007
              
              
              337,615Total
              
              $
              337,615
 
 The
        convertible debentures are issued with binding term sheets that require the
        following terms upon the sale of the converted stock by the
        purchaser:
 
 A)
              Purchaser
                  shall first be entitled to an amount equal to 200% of the face
                  amount of
                  each debenture attributable to the sale of common stock acquired
                  from the
                  conversion of the associated debt.
  B)
              After
                  the Purchaser receives the amount in A above, the Company shall
                  be
                  entitled to 50% of any additional Net Sales Proceeds of the stock.
                  Net
                  Sales Proceeds shall mean the gross proceeds received from the
                  sale of the
                  stock, less reasonable brokerage
                  commissions.
  C)
              Final
                  adjusted Net Sales Proceeds are to be wired to the Company within
                  7 days
                  from the date of the final settlement of the sale of stock from
                  the
                  conversion of all of the outstanding
                  debentures.
  As
        of
        February 28, 2005, the Company entered into binding term sheets to also provide
        for convertible debt financing similar to the terms above totaling $16.5
        million. The Company, at its option may draw up to $50,000 weekly against
        the
        total investor commitment over a 24 month period beginning February 28, 2005,
        subject to certain restrictions. As of November 30, 2005, the Company has
        not
        utilized this financing.
  **Note
        4. Related Party Note Payable:**
 The
        Company has a $70,000 note payable agreement with a related party of the
        Company. Terms of the agreement include 8% interest payable on the due date
        in
        July 2007.
 
  12
   **Note
        5. Stockholders' Equity (Deficit):**
 
 During
        the nine months ended November 30, 2005, the Company has issued 14,109,900
        shares of common stock in the amount of $141,099 and 10,000,000 shares of
        preferred stock in the amount of $107,226 through debt to equity conversions.
        The Company has also issued 16,808,456 shares of common stock for cash of
        $168,085.
 
 ***Preferred
        Stock***
 
 On
        February 4, 2005, the Corporation's board of directors designated 10,000,000
        shares of preferred stock as Series A Preferred Stock to be issued out of
        the
        20,000,000 authorized.
 
 The
        Series A Preferred Stock ("Series A Preferred") is non-interest bearing,
        does
        not have voting rights and is not entitled to receive dividends. Each share
        of
        Series A Preferred issued is automatically converted into common stock on
        a 1:1
        basis after a twelve month period. Should a liquidation event occur, the
        Series
        A Preferred automatically converts into common stock based on the foregoing
        formula. Further, the Series A Preferred is not affected by forward or reverse
        splits on the Corporation's common stock or other adjustments to the
        Corporation's capital structure. Finally, Series A Preferred is entitled
        to
        elect a majority of the Corporation's board of directors at all times, provided
        that a majority of the board of directors is, at all times,
        independent.
 
 ***Stock
        Dividend***
 
 On
        February 4, 2005 the board of directors of BDC Capital, Inc. ("Corporation")
        authorized the issuance of 3,939,000 shares of Class A Preferred Stock in
        a
        stock dividend to each shareholder of record as of November 30, 2004. For
        each
        share of common stock held as of the Record Date, the Company issued one
        share
        of Preferred Series A stock. The Corporation relied on exemptions provided
        by
        Section 4(2) of the Securities Act of 1933, as amended. In November, 2005,
        the
        board of directors rescinded this stock dividend.
 
 **Note
        6. Related Party Transactions**
 
 As
        a
        business development company, the Company has issued convertible debentures
        with
        an aggregate principal balance of $454,322 to family members of the majority
        stockholder. As of November 30, 2005 the remaining principal balance on the
        convertible debentures was $45,697, reduced by original issue discount of
        $31,939.
 
 The
        Company issued a convertible debenture to its majority stockholder with a
        principal balance $65,000. This debenture was converted in 6,061,000 shares
        of
        Series A Preferred Stock in April 2005. During the nine months ended November
        30, 2005, the Company issued a convertible debenture to its majority stockholder
        with a principal balance of $60,000. This debenture bears interest at 8%
        and
        matures in November 2007. The stockholder converted $42,226 of this debenture
        into preferred stock during the three months ended November 30, 2005, including
        interest.
 
 The
        Company sub-leases from a director of the Company approximately 1,000 square
        feet of space used for offices and operations equipment storage at 11974
        Portland Avenue, Burnsville, Minnesota at a monthly rent of $750 renewable
        monthly.
  13
  
 **Note
        7. Commitments and Contingencies:**
 
 The
        Company is exposed to asserted and unasserted claims encountered in the normal
        course of business. In the opinion of management, the resolution of these
        matters will not have a material adverse effect on the Company's financial
        position or results of operations.
 
 **Note
        8. Financial Highlights** ***-
        as a business development company***
 
 Following
        is a schedule of financial highlights for the nine months ended November
        30,
        2005;
  Per
                  Share Data:Net
                  asset value, at conversion to a BDCNet
                  asset value beginning of period, March 1, 2005
              
              $
              0.07Income
                  from investment operations:Net
                  investment loss
              
              
              (0.02
              )Net
                  realized gains on investments
              
              
              -Net
                  unrealized appreciation on investments
              
              
              -Net
                  decrease in net assets resulting from operations
              
              
              (0.02
              )Dividends
              
              
              -Issuance
                  of shares
              
              
              0.01Issuance
                  of preferred shares
              
              
              0.01Dilutive
                  effect of share insurances
              
              
              (0.06
              )Increase
                  in stockholders' equity (deficit) from OID on convertible
                  debentures
              
              
              0.01Net
                  decrease in stockholder's equity relating to equity
                  activity
              
              
              (0.03
              )Net
                  asset value, end of period
              
              $
              0.02Per
                  share market value at end of period
              
              $
              0.02Total
                  Return
              
              
              0
              %Shares
                  outstanding at end of period, November 30, 2005
              
              
              47,898,473Ratio/Supplemental
                  Data:Net
                  assets end of period
              
              $
              787,881Ratio
                  of operating expenses to average net assets (annualized)
              
              
              189
              %Ratio
                  of net investment loss to average assets (annualized)
              
              
              189
              %
  **Note
        9. Subsequent Events:**
 
 During
        the period December 1, 2005 to January 2, 2006, convertible debenture holders
        converted $319,842 including accrued interest of $26,895 of the outstanding
        convertible debentures into 34,673,663 shares of common stock.
 
 In
        addition, on December 30, 2005, the Company issued 40,000,000 shares of common
        stock for a total cash proceeds of $400,000. Also, the company entered into
        subscription receivable agreements for 314,000,000 shares of restricted common
        stock valued at $3,140,000 of which no proceeds have been received as of
        January
        13, 2006.
  14
  
 ITEM
        2.
 MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
 
 The
        following is a discussion of the financial condition and results of operations
        of the Company for the three and nine months ended November 30, 2005 and
        2004,
        which should be read in conjunction with, and is qualified in its entirety
        by,
        the financial statements and notes thereto included elsewhere in this report.
 
 The
        results of operations for fiscal 2005 and 2004 are reported separately. The
        three and nine-month periods ended November 30, 2004, reflects the Company's
        results prior to operating as a business development company under the
        Investment Company Act of 1940, as amended. The three and nine-month periods
        ended November 30, 2005, reflects the Company's results as a business
        development company under the Investment Company Act of 1940, as amended.
        Accounting principles used in the preparation of the financial statements
        beginning December 1, 2004 are different than those of prior periods and,
        therefore, the financial position and results of operations of these periods
        are
        not directly comparable. The primary differences in accounting principles
        relate
        to the carrying value of investments and consolidations.
 
 Changes
        in unrealized gains (losses) on the changes in value of portfolio investments
        for business development companies are recognized each period. Prior to becoming
        a business development company, unrealized gains (losses) on the change in
        value
        of investments were recorded as accumulated comprehensive income in the
        statement of stockholders equity. Gains (losses) on investment would only
        be
        recognized when realized or when an investment was permanently
        impaired.
 
 As
        a
        business development company, consolidation of portfolio companies is not
        required in which the Company has a controlling interest. In contrast, prior
        to
        operating as a business development corporation, entities in which the Company
        had controlling interest would have been required to be
        consolidated.
 
 RESULTS
        OF OPERATIONS
 
 THREE
        MONTHS ENDED NOVEMBER 30, 2005 AND NOVEMBER 30, 2004
 
 The
        results of operations are reported separately. The three-month period,
        representing the period September 1, 2004 through November 30, 2004 reflects
        the
        Company’s results prior to operating as a business development company under the
        Investment Company Act of 1940. The three-month period ended November 30,
        2005
        reflects the Company’s results as a business development company under the
        Investment Company Act of 1940.
 
 For
        the
        three months ended November 30, 2005, the Company incurred an investment
        loss of
        $169,882. The main components of this loss related to $47,181 of administrative
        fees with a majority of these fees relating to the management of the Company
        and
        $108,592 for interest expense on convertible debt. Included in interest expense
        was $99,940 of amortization of the original debt discount which originated
        from
        the beneficial conversion feature related to the convertible debt.
 
  15
 
 For
        the
        three months ended November 30, 2004, the Company incurred a net loss of
        $134,177. The net assets and operations of the computer sales division was
        transferred to the BDC Partners, Inc. when the Company became a business
        development company.
 
 NINE
        MONTHS ENDED NOVEMBER 30, 2005 AND NOVEMBER 30, 2004
 
 The
        results of operations are reported separately. The nine-month period,
        representing the period March 1, 2004 through November 30, 2004 reflects
        the
        Company’s results prior to operating as a business development company under the
        Investment Company Act of 1940. The nine-month period ended November 30,
        2005
        reflects the Company’s results as a business development company under the
        Investment Company Act of 1940.
 
 For
        the
        nine months ended November 30, 2005, the Company incurred an investment loss
        of
        $744,398. The main components of this loss related to $73,687 of professional
        fees with a majority of these fees relating to setting up the Company as
        a
        business development company and $554,432 for interest expense on convertible
        debt. Included in interest expense was $523,879 of amortization of original
        debt
        discount which originated from the beneficial conversion feature related
        to the
        convertible debt.
 
 For
        the
        nine months ended November 30, 2004, the Company incurred a net loss of
        $171,706. The net assets and operations of the computer sales division was
        transferred to the BDC Partners, Inc. when the Company became a business
        development company.
 
 LIQUIDITY
        AND CAPITAL RESOURCES
 
 ***As
        a business development company***
 
 BDC
        Capital, Inc.’s cash position at November 30, 2005 was $6,140, a decrease of
        $254,039 from $260,179 at February 28, 2005. During the nine months ended
        November 30, 2005, net cash used by operating activities was $461,644. Net
        cash
        provided by financing activities of $207,605 for the nine months ended November
        30, 2005 consisted of issuance of common stock and notes payable during the
        nine
        month period.
 
 Our
        current monthly operating expenses are approximately $25,000 per month. We
        anticipate that any additional financing would be through the sales of our
        common stock or other equity-based securities. We do have in place a $16.5
        million equity line commitment from new and existing investors. BDC Capital,
        Inc. signed agreements for the equity line in February 2005. Under the terms
        of
        the agreement, BDC Capital may elect to receive as much as $16.5 million
        from
        the investors in common stock purchases over the next two years.
 
 ***Prior
        to becoming a business development company***
 
 BDC
        Capital, Inc.’s cash position at November 30, 2004 was $16,333, an increase of
        $6,650 from $9,683 at February 29, 2004. During the nine months ended November
        30, 2004, net cash used by operating activities was $130,157.
  Net
        cash
        provided by financing activities of $136,807 for the nine months ended November
        30, 2004.
 
  16
 
 **Recent
        Developments — Portfolio Companies**
 
 During
        the quarter ended November 30, 2005, BDC Capital, Inc. invested $35,000 equity
        in BDC Partners, Inc bringing the total investment in BDC Partners, Inc.
        to
        $388,303 as of November 30, 2005. The additional investment was funded by
        proceeds received from the stock subscription receivable.
 
 **Critical
        Accounting Policies**
 
 Critical
        accounting policies are those that are both important to the presentation
        of our
        financial condition and results of operations and those that require
        management’s most difficult, complex or subjective judgments. Our critical
        accounting policies are those applicable to the valuation of investments.
 
 Valuation
        of Portfolio Investments
 
 As
        a
        business development company, we invest primarily in illiquid securities
        including debt and equity securities of private companies. The investments
        are
        generally subject to restrictions on resale and generally have no established
        trading market. We value substantially all of our equity investments at fair
        value as determined in good faith by our valuation committee on a quarterly
        basis. The valuation committee, comprised of three or more non-interested
        board
        members, reviews and approves the valuation of our investments within the
        guidelines established by the board of directors. Fair value is generally
        defined as the amount that an investment could be sold for in an orderly
        disposition over a reasonable time. Generally, to increase objectivity in
        valuing our assets, external measures of value, such as public markets or
        third
        party transactions, are utilized whenever possible. Valuation is not based
        on
        long term work-out value, nor immediate liquidation value, nor incremental
        value
        for potential changes that may take place in the future.
 
 ***Recently
        issued accounting pronouncements:***
 
 In
        December 2004, the FASB issued SFAS No. 123(R) “Share-Based Payment”.
        SFAS 123(R) requires the recognition of compensation cost relating to
        share-based payment transactions in financial statements. That cost will
        be
        measured based on the fair value of the equity or liability instruments issued
        as of the grant date, based on the estimated number of awards that are expected
        to vest. SFAS 123(R) covers a wide range of share-based compensation
        arrangements including share options, restricted share plans, performance-based
        awards, share appreciation rights, and employee share purchase plans.
        Statement 123(R) replaces FASB Statement No. 123, “Accounting for
        Stock-Based compensation,” and supersedes APB Opinion No. 25, “Accounting
        for Stock Issued to Employees”. Statement 123(R) is effective for us
        beginning March 1, 2006. We are in the process of evaluating the impact of
        SFAS 123(R) on our financial position and results of
        operations.
 
 FORWARD-LOOKING
        INFORMATION
 
 Any
        statements contained herein related to future events are forward-looking
        statements and are made pursuant to the safe harbor provisions of the Private
        Securities Litigation Reform Act of 1995. Readers are cautioned not to place
        undue reliance on forward-looking statements. BDC Capital, Inc. undertakes
        no
        obligation to update any such statements to reflect actual events.
 
  17
 
 ITEM
        3.
        CONTROLS AND PROCEDURES
 
 (a)
        Evaluation of Disclosure Controls and Procedures.
 
 An
        evaluation made at the end of the period covered by this report was performed
        under the supervision and with the participation of the Company's president,
        chief executive officer ("CEO") and the chief financial officer ("CFO") of
        the
        effectiveness of the design and operation of the Company's disclosure controls
        and procedures to insure that the Company records, processes, summarizes
        and
        reports in a timely and effective manner the information required to be
        disclosed in reports filed with or submitted to the Securities and Exchange
        Commission. Based on that evaluation, the Company's management, including
        the
        CEO and CFO, concluded that the Company's disclosure controls and procedures
        were effective in timely bringing to their attention material information
        related to the Company required to be included in the Company's periodic
        Securities and Exchange Commission filings. Since the date of this evaluation,
        there have been no significant changes in the Company's internal controls
        or in
        other factors that could significantly affect those controls.
 
 However,
        due to the limited number of Company employees engaged in the authorization,
        recording, processing and reporting of transactions, there is inherently
        a lack
        of segregation of duties. The Company periodically assesses the cost versus
        benefit of adding the resources that would remedy or mitigate this situation,
        and currently does not consider the benefits to outweigh the costs of adding
        additional staff in light of the limited number of transactions related to
        the
        Company's operations.
 
 (b)
        Changes in Internal Controls Over Financial Reporting.
 
 There
        have been no significant changes in internal control over financial reporting
        that occurred during the fiscal period covered by this report that have
        materially affected or are reasonably likely to materially affect the Company’s
        internal control over financial reporting.
 
 **PART
        II**
 
 ITEM
        1.
 LEGAL PROCEEDINGS
 
 BDC
        Capital, Inc. is, from time to time, a party to litigation arising in the
        normal
        course of its business. BDC believes that none of these actions will have
        a
        material adverse effect on its financial condition or results of
        operations.
 
 ITEM
        2.
        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 None.
 
 ITEM
        3.
        DEFAULTS UPON SENIOR SECURITIES
 
 None.
  ITEM
        4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None.
   18
  
 ITEM
        5.  OTHER
        INFORMATION
 
 (a)
              All
                  information required to be disclosed on a report on Form 8-K during
                  the
                  period ended November 30, 2005 has previously been
                  reported.
  (b)
              There
                  have been no material changes to the procedures by which security
                  holders
                  may recommend nominees to the registrant’s board of
                  directors.
 
 ITEM
        6.
 EXHIBITS AND REPORTS ON FORM 8-K
  3.1
              Articles
                  of Incorporation, as amended (1)
              Previously
                  Filed3.2
              Bylaws
                  (1)
              Previously
                  Filed31
              Certifications
                  of Chief Executive Officer and Chief Financial Officer under Rule
                  13a-14(a)/15d-14(a)
              Included32
              Certifications
                  under Section 1350
              Included
 
 (1)
        Incorporated by reference to exhibit filed as a part of Registration Statement
        on Form 10-SB (Commission File No. 000-27225).
  SIGNATURES
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 
 Date:01-13-2006
              BDC
                  CAPITAL, INC./s/Richard
                  A.
                  PomijeRichard
                  A. Pomije, CEO
 
               19