UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
    Act of 1934

    For the Fiscal Year Ended June 30, 2005

                        Commission File Number: 000-26887


                          Franchise Capital Corporation
             (Exact Name of Registrant as Specified in Its Charter)

          Nevada                                           98-0353403
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

                       8655 E. Via De Ventura Suite G-217
                              Scottsdale, AZ 85058
                    (Address of principal executive offices)

                                 (480) 355-8142
                 (Issuers telephone number, including area code)

                                       N/A
          (former name or former address, if changed since last report)

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

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

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]

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

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

         The aggregate  market value of the voting stock held by non  affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked prices of such stock as September 23, 2005 was  $2,036,206,  based
on the last sale price of $.03 as reported on the bulletin board.

     The Registrant had  68,562,852  shares of common stock,  $0.0001 par value,
outstanding as of September 23, 2005.

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

                   Documents incorporated by reference: None
<PAGE>
                          FRANCHISE CAPITAL CORPORATION

                                TABLE OF CONTENTS

PART I

ITEM 1.  BUSINESS                                                              3
ITEM 2.  PROPERTIES                                                            6
ITEM 3.  LEGAL PROCEEDINGS                                                     6
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                   6

PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS    7
ITEM 6.  SELECTED FINANCIAL DATA                                               7
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS                                                 8
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK            10
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                          12
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE                                                 12
ITEM 9A. CONTROLS AND PROCEDURES                                              13
ITEM 9B. OTHER INFORMATION                                                    13

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                   14
ITEM 11. EXECUTIVE COMPENSATION                                               15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         AND RELATED STOCKHOLDER MATTERS                                      16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                       17
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES                              17
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE                               17

SIGNATURES                                                                    18

                                       2
<PAGE>
                                     PART I

FORWARD LOOKING STATEMENTS

This document includes statements that may constitute forward-looking statements
made pursuant to the Safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The Company would like to caution certain readers  regarding
certain  forward-looking   statements  in  this  document  and  in  all  if  its
communications  to  shareholders  and  others,   on  management's   projections,
estimates  and  all  other   communications.   Statements   that  are  based  on
management's   projections,   estimates  and  assumptions  are   forward-looking
statements.   The  words  believe,  expect,   anticipate,   intend  and  similar
expressions  generally identify  forward-looking  statements.  While the Company
believes  in  the  veracity  of  all  statements  made  herein,  forward-looking
statements are  necessarily  based upon a number of estimates,  and  assumptions
that,  while  considered  reasonable by the Company,  are inherently  subject to
significant business,  economic and competitive  uncertainties and contingencies
and  know  and  unknown  risks.  Many of the  uncertainties  and  contingencies,
including  those specific  matters  described in the second  paragraph of Item 7
below,  can affect events and the Company's  actual  results and could cause its
actual results to differ  materially from that expressed in any  forward-looking
statements made by, or on behalf, of the Company.

ITEM 1. DESCRIPTION OF BUSINESS

Franchise Capital Corporation ("The Company") was formed as a Nevada corporation
on July 6, 2001 under the name  Cortex  Systems,  Inc.  They were  originally  a
development  stage company that intended to establish  memory clinics in several
different locations in North America.  Unfortunately,  the Company was unable to
successfully execute its business plan. In July of 2003, the Company changed its
name to BGR  Corporation.  Along with the name change came a new  management and
ownership  team.  The  intention  of  management  is to acquire  new  innovative
fast-casual restaurant concepts,  develop them into a profitable working design,
and  franchise  them across the country.  The  Corporation's  partner,  American
Restaurant   Development   Company,  is  a  professional   restaurant  designer,
franchiser,  and restaurant  management  company where principles have extensive
experience in the industry.  In December of 2004 the Company changed its name to
Franchise Capital Corporation. The names "Franchise Capital Corporation",  "we",
"our" and "us" used in this report refer to Franchise Capital Corporation.

On  December  23,  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  N-54A.  As a  BDC,  The  Company  plans  to  focus  on  current
opportunities  available to this  attractive  business  model in these  somewhat
uncertain economic times.

INVESTMENT STRATEGY

As a Business  Development Company, the Company is required to have at lease 70%
of its assets in "eligible portfolio  companies." It is stated in the Investment
Committee  Charter that the Company will endeavor to maintain this minimum asset
ratio.

PORTFOLIO INVESTMENTS

COMSTOCK JAKE'S FRANCHISE CO., LLC

Comstock Jake's is a fast-casual/full-service family style dinner house concept.
Jake's is designed for end-cap and/or in-line  locations with the typical square
footage being 2800-3200 sq./ft,  and seating for 80-100 inside and 30 in a patio
setting.  The principle  feature of the restaurant is their special blend of top
sirloin  hamburgers,  sized  to their  specifications,  delivered  fresh,  never
frozen.  They serve all  sandwiches  on  fresh-baked  buns,  baked daily in each
store.  Jake's offers a unique variety of foods beyond their hamburgers,  as the
menu is designed to appeal to a diverse guest mix, including young, old, and the
young-at-heart.  Such  tasty  fare  as  grilled  ribs,  grilled  chicken  breast
sandwiches,  roasted chicken, gourmet salads, homemade hearty soups, corn bread,
beer and wine,  and ice cream  shakes and  sundaes,  along  with fast,  friendly
service, will play a part in Comstock Jake's success

                                       3
<PAGE>
COUSIN VINNIE'S FRANCHISE CO., LLC

Cousin  Vinnie's  Italian  Diner  is a  Roman-inspired  Italian  Diner  offering
appetizers,  made-to-order  pasta  dishes,  thin crust  pizzas,  special  meats,
seafood and chicken (delivered fresh, never frozen),  paninis, soups, salads and
desserts all made to order in the customer's  full view.  This Italian eatery is
set in a casual, sophisticated, upscale environment that is incredibly fresh and
consistently  satisfying.  Cousin  Vinnie's is postured  closer to casual dining
than the typical  fast-casual  format.  This will  position  Cousin  Vinnie's to
realize a $20-per-person daylong check average, with a solid lunch business with
an $8-$9 average check.  Cousin  Vinnie's is designed for end-cap and/or in-line
locations,  a third of the cost paying for a typical freestanding  building. The
typical square footage is 2800-3200 sq/ft, with seating for 85-110 inside and 30
in a patio setting.

KIRBY FOO'S FRANCHISE CO., LLC

Kirby Foo's is a high-end,  full-service/fast-casual  Asian Grill concept and is
positioned closer to casual dining than the typical  fast-casual  format.  Kirby
Foo's is designed for end-cap and/or  in-line  locations with the typical square
footage being 2500-3000  sq./ft,  and seating for 70-90 inside and 30 in a patio
setting. Kirby Foo's food is simply prepared and of the highest quality and they
offer a wide  variety of food  products,  all of which are  prepared in a casual
dining environment.  They serve special meats, seafood, and chicken all prepared
to their specifications, delivered fresh, never frozen. Kirby Foo's is unique in
the variety of foods they offer beyond the typical Asian fare, such as Blackened
Ahi Katsu,  Panko Fried Filet of Beef,  Nori  Crusted  Seabass,  Crispy Pork Won
Tons,  Shrimp Thai-Fu,  and Peking Roasted Duck. All designed to contribute to a
diverse guest mix and high guest frequency.

KOKOPELLI FRANCHISE CO., LLC

Kokopelli  Sonoran Grill,  founded in Phoenix,  Arizona in 1997,  specializes in
Sonoran/Mexican  cuisine featuring made-to-order  big-burritos,  tacos, fajitas,
and other Mexican favorites. Kokopelli's uses only the freshest ingredients with
no preservatives, additives, or conditioners and only the highest quality meats,
chicken,  and seafood products at a reasonable price.  Kokopelli  differentiates
itself from other fast-casual chains such as Chipotle,  QDOBA, and Baja Fresh by
serving authentic hand-blended Sonoran spices, beans slow-cooked everyday (never
refried) and  tortillas  steamed to order,  not held in a warmer.  Additionally,
Kokopelli  serves many items found in full service Mexican  restaurants  such as
Grilled  Salmon  with Mango  Salsa,  Steak  Verde with  Tomatilla  Salsa,  Pollo
Colorado with Smoked Cheese and Peppers, beer, wine and  frozen-margaritas,  and
also offers a variety of healthful and low-carb meal options.

FATHOM BUSINESS SYSTEMS, INC.

Fathom Business  Systems is a licensed dealer of Point of Sale (POS) systems for
restaurants of all types and sizes. Its president,  James Medeiros, who has over
25 years of experience in the foodservice  industry,  heads the company.  With a
thorough   working   knowledge   of   restaurants,   the  company   strives  for
cost-effective POS solutions for its clients. Fathom does not just sell register
systems to  restaurants,  but also installs,  services,  and maintains them. The
company is known for its fast, friendly, and personalized service.

FIT-N-HEALTHY FRANCHISE COMPANY, LLC

Fit & Healthy Market Cafe is a concept that will serve great tasting, nutritious
meal that fits into a healthy lifestyle. Each Fit-n-Healthy Market Cafe combines
a quick-serve restaurant with a convenience-style  retail store that carries the
best health-oriented consumable products available for purchase.

CHANGES IN OUR CORPORATE STRUCTURE

Effective December 17, 2004, the Company designated  30,000,000 shares of Series
C Preferred  Stock. The Series C Preferred Stock is non-interest  bearing,  does
not have voting rights and is not entitled to receive  dividends.  Each share of
Series C issued can be converted into Common Stock on a 1:1 basis.  In the event
of a liquidation  event, the Series C stock  automatically  converts into common
stock based on the foregoing  formula.  By  designation,  the Series C Preferred
Stock is not affected by forward or reverse splits of the Company's common stock
or  other  adjustments  to the  Company's  capital  structure.  The  Series C is
entitled to name three members of the Company's Board of Directors at all times.

                                       4
<PAGE>
Effective  January 14, 2005,  we  implemented  a one for 10 reverse split of our
common  stock.  All share  and per  share  amounts  presented  in our  financial
statements  which  are part of this  Annual  Report  on Form  10-K/A,  have been
restated  retroactively  to reflect the split as if it had occurred on the first
day of the first period presented, or July 1, 2004.

Subsequent to December 31, 2004,  the Company was notified by the Securities and
Exchange  Commission  ("Commission")  that the terms of the  Series C  Preferred
Stock issued by the Company may be in violation of Section 23 of the  Investment
Company Act of 1940. As a result,  the Series C holders agreed to a 1:10 reverse
split of the Series C stock  corresponding  to the similar 1:10 reverse split of
the  Company's  common  stock on January  14,  2005.  Further,  the  Company has
restructured the terms of the Series C Preferred Stock. Most significantly,  the
rights of the Series C Preferred Stock to convert to common stock and provisions
in  the  Series  C  Preferred  Stock  affording   protections   against  capital
reorganization were eliminated.

EMPLOYEES

During the fiscal year ended June 30, 2005,  Franchise  Capital  Corporation had
one employee. Management intends to hire additional employees only as needed and
as funds are available.  In such cases  compensation to management and employees
will be considered with prevailing wages for services rendered.

COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002

On July 30, 2002,  President Bush signed into law the Sarbanes-Oxley Act of 2002
(the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide variety of new
regulatory  requirements on publicly held companies and their insiders.  Many of
these requirements will affect us. For example:

     -    Our chief  executive  officer  and chief  financial  officer  must now
          certify the  accuracy of the  financial  statements  contained  in our
          periodic reports;
     -    Our  periodic   reports  must  disclose  our  conclusions   about  the
          effectiveness of our controls and procedures;
     -    Our periodic  reports must  disclose  whether  there were  significant
          changes  in our  internal  controls  or in other  factors  that  could
          significantly  affect these  controls  subsequent to the date of their
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses; and
     -    We may not make any loan to any director or  executive  officer and we
          may not materially modify any existing loans.

The  Sarbanes-Oxley  Act has  required  us to review our  current  policies  and
procedures to determine  whether we comply with the  Sarbanes-Oxley  Act and the
new  regulations  promulgated  thereunder.  We  will  continue  to  monitor  our
compliance with all future regulations that are adopted under the Sarbanes-Oxley
Act and  will  take  actions  necessary  to  ensure  that  we are in  compliance
therewith.

CODE OF ETHICS, AUDIT COMMITTEE CHARTER AND INVESTMENT COMMITTEE CHARTER

The  Board of  Directors  of the  Company  adopted  a Code of  Ethics,  an Audit
Committee Charter and an Investment Committee Charter on December 23, 2004.

The Code of Ethics in general prohibits any officer, director or advisory person
(collectively,  "Access  Person") of the Company from  acquiring any interest in
any security  which the Company (i) is  considering  a purchase or sale thereof,
(ii) is being purchased or sold by the Company,  or (iii) is being sold short by
the Company.  The Access  Person is required to advise the Company in writing of
his or  her  acquisition  or  sale  of  any  such  security.  Franchise  Capital
Corporation's  code of ethics  was filed as an  exhibit  to its Form 10-K  filed
September 29, 2005.

The primary  responsibility  of the Audit  Committee is to oversee the Company's
financial  reporting  process on behalf of the Company's  Board of Directors and
report the result of their activities to the Board. Such responsibilities  shall
exclude  but shall not be  limited  to,  the  selection,  and if  necessary  the

                                       5
<PAGE>
replacement of the Company's independent auditors,  review and discuss with such
independent auditors and the Company's internal audit department (i) the overall
scope  and plans for the  audit,  (ii) the  adequacy  and  effectiveness  of the
accounting and financial controls, including the Company's system to monitor and
manage business risks, and legal and ethical programs,  and (iii) the results of
the annual  audit,  including  the  financial  statements  to be included in the
Company's  annual report on Form 10-K.  Franchise  Capital  Corporation's  audit
committee  charter was filed as an exhibit to its Form 10-K filed  September 29,
2005.

The Investment  Committee  shall have oversight  responsibility  with respect to
reviewing and overseeing the Company's  contemplated  investments  and portfolio
companies and investments on behalf of the Board and shall report the results of
their  activities to the Board.  Such  Investment  Committee  shall (i) have the
ultimate authority for and responsibility to evaluate and recommend investments,
and (ii) review and discuss with  management  (a) the  performance  of portfolio
companies,  (b) the diversity and risk of the  Company's  investment  portfolio,
and, where appropriate,  make recommendations respecting the role or addition of
portfolio  investments and (c) all solicited and unsolicited  offers to purchase
portfolio  companies.   Franchise  Capital  Corporation's  investment  committee
charter was filed as an exhibit to its Form 10-K filed September 29, 2005.

ITEM 2.  PROPERTIES

The Company maintains it offices at 7400 E. McDonald Suite 121,  Scottsdale,  AZ
85050,  where it subleases  three offices spaces at a monthly rate of $2,889.00.
The lease term is month to month.  Management  believes that its  facilities are
adequate for its present business.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings.

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

A special meeting of shareholders of Franchise  Capital  Corporation was held on
December 16, 2004 where the following matters were voted upon, and approved,  by
the shareholders:

     a)   To authorize  5,030,000,000 shares of capital stock of the Company, of
          which 5 billion  shares  will  relate to Common  Stock and  30,000,000
          million  shares will  relate to  preferred  stock,  subject to further
          designation by the Board of Directors of the Company; and
     b)   To  amend  Article  I of the  Articles  of  Incorporation  to  read as
          follows:   "The  name  of  this   corporation  is  Franchise   Capital
          Corporation", and
     c)   To effect  one-for-ten  reverse  stock split of the  Company's  common
          stock  (the  "Common  Stock")  by  reducing  the  number of issued and
          outstanding  shares of Common Stock from  48,458,351 to  approximately
          4,845,835 (the "Reverse Split"); and
     d)   To authorize the Company's Board of Directors,  without the consent of
          the  stockholders of the  corporation,  to adopt any  recapitalization
          affecting the  outstanding  shares of capital stock of the corporation
          by  effecting  a forward  or reverse  split of all of the  outstanding
          shares  of  any  class  of  capital  stock  of the  corporation,  with
          appropriate   adjustments  to  the  corporation's   capital  accounts,
          provided  that the  recapitalization  does  not  affect  the  ratio of
          unissued to authorized capital stock of that class; and
     e)   To approve the  issuance of 2,777,500  warrants to purchase  shares of
          the Company's  common stock.
     f)   To approve the Company's Stock Option Plans.

                                       6
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

MARKET INFORMATION

The  Company's  Common Stock is traded on the OTCBB  (Over-The-Counter  Bulletin
Board)  under the symbol  "FCCN".  The  following  table sets forth the  trading
history of the Common  Stock on the Bulletin  Board for each quarter  since June
2004 through June 30, 2005, as reported by Dow Jones Interactive. The quotations
reflect inter-dealer prices, without retail mark-up,  markdown or commission and
may not represent actual transactions.

Quarter Ending         Quarterly High       Quarterly Low        Quarterly Close
--------------         --------------       -------------        ---------------
9/30/2004                   0.053               0.046                  0.051
12/31/2004                  0.015               0.013                  0.013
3/31/2005                   0.10                0.083                  0.91
6/30/2005                   0.027               0.020                  0.022

HOLDERS OF RECORD

As of June 30,  2005  there  were  approximately  72  holders  of  record of the
Company's common stock.

DIVIDENDS

The  Company  has never paid a cash  dividend  on its common  stock.  Payment of
dividends is at the discretion of the Board of Directors. The Board of Directors
plans to retain  earnings,  if any,  for  operations  and does not intend to pay
dividends in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

Except as otherwise noted,  the securities  described in this Item 5 were issued
pursuant to the  exemption  from  registration  \provided by Section 4(2) of the
Securities  Act of 1933.  Each such  issuance  was made  pursuant to  individual
contracts which are discrete from one another and are made only with persons who
were  sophisticated in such  transactions and who had knowledge of and access to
sufficient  information  about  the  Company  to  make  an  informed  investment
decision. Among the information provided was the fact that the securities issued
were  restricted  securities.  No commissions  were paid in connection  with the
transactions described below unless specifically noted.

As of June 30, 2005  Franchise  Capital  Corporation  had  32,927,305  shares of
common stock outstanding.

ITEM 6. SELECTED FINANCIAL DATA

Financial Position as of June 30:

<TABLE>
<CAPTION>
                                             2005             2004            2003             2002
                                         -----------      -----------     -----------      ----------
<S>                                      <C>              <C>             <C>             <C>
Total asset                              $ 1,026,177      $   355,199     $        --     $    73,772
Total liabilities                        $   678,868      $   517,400     $        25     $    34,444
Net assets                               $   347,309      $  (162,201)    $       (25)    $    39,328
Net asset value per outstanding share    $      0.01      $    (0.005)    $     (0.00)    $     0.007
Shares outstanding, end of fiscal year    32,927,305       34,652,400      34,573,800       5,762,300
</TABLE>

                                       7
<PAGE>
Operating Data:

<TABLE>
<CAPTION>
                                       January 1, 2005   July 1, 2004
                                         to June 30,    to December 31,    June 30,        June 30,      June 30,
                                           2005(1)           2004            2004            2003          2002
                                         ----------       ----------      -----------     ----------    ---------
<S>                                      <C>              <C>             <C>             <C>           <C>
Total investment income                  $       --       $   62,334      $   108,974     $    2,625    $      68
Total expenses                           $  750,103       $  791,805      $ 5,341,766     $   41,978    $  37,590
Net operating (loss) income              $ (584,499)      $ (188,018)     $(5,405,130)    $  (39,353)   $ (37,522)
Total tax expense (benefit)              $       --       $       --      $        --     $       --    $      --
Net realized income (loss) from
investments                              $ (293,480)      $       --      $        --     $       --    $      --
Net unrealized income (loss) from
investments                              $  459,084       $       --      $        ---    $       ---   $      --
</TABLE>

----------
(1)  The  Company  began  operating  as a Business  Development  Corporation  on
     December 23, 2004,  all prior period figures are based on the operations of
     present portfolio companies.

ITEM 7. MANAGEMENTS  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS
        OF OPERATIONS

The following  information  should be read in conjunction  with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-K/A.

The information contained in this section should be read in conjunction with the
Selected Financial Data and our Financial Statements and notes thereto appearing
elsewhere in this 10K/A. The 10K/A,  including the  Management's  Discussion and
Analysis  of   Financial   Condition   and  Results  of   Operations,   contains
forward-looking  statements that involve  substantial  risks and  uncertainties.
These forward-looking  statements are not historical facts, but rather are based
on current  expectations,  estimates and  projections  about our  industry,  our
beliefs, and our assumptions. Words such as "anticipates", "expects", "intends",
"plans", "believes",  "seeks", and "estimates" and variations of these words and
similar expressions are intended to identify forward-looking  statements.  These
statements  are not guarantees of future  performance  and are subject to risks,
uncertainties,  and other  factors,  some of which are  beyond our  control  and
difficult to predict and could cause actual  results to differ  materially  from
those  expressed  or  forecasted  in the  forward-looking  statements  including
without  limitation (1) any future economic downturn could impair our customers'
ability  to repay  our loans  and  increase  our  non-performing  assets,  (2) a
contraction of available credit and/or an inability to access the equity markets
could impair our lending and investment activities, (3) interest rate volatility
could adversely  affect our results,  (4) the risks associated with the possible
disruption  in the  Company's  operations  due to  terrorism  and (5) the risks,
uncertainties  and other  factors we  identify  from time to time in our filings
with the  Securities  and Exchange  Commission,  including our Form 10-Ks,  Form
10-Qs and Form 8-Ks.  Although we believe  that the  assumptions  on which these
forward-looking  statements are based are reasonable,  any of those  assumptions
could prove to be inaccurate,  and as a result, the  forward-looking  statements
based on those assumptions also could be incorrect.  In light of these and other
uncertainties,  the  inclusion of a projection or  forward-looking  statement in
this Quarterly Report should not be regarded as a representation  by us that our
plans and  objectives  will be achieved.  You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this Annual
Report.

EXECUTIVE OVERVIEW

The  Company was formed as a Nevada  corporation  on July 6, 2001 under the name
Cortex  Systems,  Inc. We were  originally  a  development  stage  company  that
intended to establish  memory  clinics in several  different  locations in North
America. We were unable to successfully execute this business plan. As a result,

                                       8
<PAGE>
in July of 2003, we changed the Company's name to BGR  Corporation,  replaced or
reconstituted  the  management  and board of directors  and changed our business
focus.  The  Company's  focus  was  on  acquiring  new  innovative   fast-casual
restaurant  concepts,  develop  them  into  a  profitable  working  design,  and
franchise them across the United States. On January 20, 2003, we entered into an
agreement with American  Restaurant  Development  Corporation,  or ARDC, to grow
restaurant  concepts  into a fully  viable  franchise  system and to expand each
restaurant  concepts  nationwide.  The  controlling  shareholder  of ARDC is our
largest shareholder.  To date, we have formed four joint ventures with different
restaurant concepts under this model.

On November 4, 2003, we acquired Fathom Business Systems, or Fathom. Fathom is a
company  specializing in restaurant point of sales  equipment.  Fathom generates
additional  revenue by  providing  its  customers  with the supplies and service
needed for the equipment.

On February 2, 2004,  we executed an agreement  with AZTECA Wrap Foods,  LLC, or
AZTECA.  AZTECA  is  the  owner  and  operator  of  KoKopelli's  Mexican  Grill.
KoKopelli's is a fast casual Mexican  restaurant  specializing in  made-to-order
Mexican-style  food. Per the agreement,  we own 50% of the joint venture entity,
while the other 50% is owned by AZTECA. Additionally, we are required to provide
the funding to initiate the franchising of KoKopelli's through ARDC. AZTECA will
provide  exclusive  rights to the "KoKopelli"  name,  trade marks,  trade dress,
operating system and recipes.

In April 2004, we entered into a shareholders  agreement with Alexis Group, LLC,
or ALEXIS.  ALEXIS is the owner and operator of Pauli's Home of the SteakBurger.
Per the agreement,  we own 50% of the joint venture entity,  while the other 50%
is owned by ALEXIS.  Additionally,  we are  required  to provide  the funding to
initiate the franchising of Pauli's through ARDC.  ALEXIS will provide exclusive
rights to the "Pauli's" name,  trade marks,  trade dress,  operating  system and
recipes.

In April 2004, we executed a  shareholders  agreement with Brian  Ruggiero,  the
owner and operator of Cousin Vinnie's Italian Diner. The Cousin Vinnie's concept
was brought to FRANCHISE CAPITAL Corporation by American Restaurant  Development
Corporation ("ARDC"). Per the agreement, we own 50% of the joint venture entity,
while the other  50% is owned by  Ruggiero.  Additionally,  we are  required  to
provide the funding to initiate the franchising of Cousin Vinnie's through ARDC.
Ruggiero will provide  exclusive  rights to the "Cousin  Vinnie's"  name,  trade
marks, trade dress, operating system and recipes.

In April 2004,  the  purchase  agreement  for us to acquire  Deville,  Inc.  was
mutually  cancelled.  The  agreement  called for us to pay $700,000 in stock and
cash for the exclusive rights to the Lucky Lou's fast casual restaurant concept.
Stock that had been issued per the  agreement has been returned to the Company's
treasury.

On April 15,  2004,  our Board of  Directors  approved a stock  dividend for all
shareholders  of  record  as of May 15,  2004.  Under he  terms of the  dividend
distribution, for every three shares held by a shareholder they will receive one
additional share. No fractional shares are to be issued.

On  December  17,  2004  the  Company  changed  its  name to  Franchise  Capital
Corporation. The Board of Directors felt this name more closely defined its true
operations, of investing in small, start up companies.

Effective  December 23, 2004,  the Company  converted to a Business  Development
Company  under the  Investment  Company  Act of 1940.  Upon  completion  of this
conversion,   they  became  an  internally  managed,   diversified,   closed-end
investment  company.  Prior to the  conversion  they were a diversified  holding
company.  Since the conversion to a Business Development Company occurred at the
end of the quarter,  the financials in this quarterly report reflect the Company
operating as a diversified  holding  company for the 3 months ended December 31,
2004.

On May 16,  2004 the  Company  gained an  additional  50%  control of  Kokopelli
Franchise  Company,  LLC for a total  of 100% by the way of a  "Buy-Sell"  offer
within the operating  agreement the Company had with AZTECA Wrap Foods, LLC. The
purchase price for the 50% was $250,000.

In June of 2005 the Company created Fit-n-Healthy  Franchise Company, LLC. Fit &
Healthy Market Cafe is a concept that will serve great tasting,  nutritious meal

                                       9
<PAGE>
that fits into a healthy lifestyle.  Each  Fit-n-Healthy  Market Cafe combines a
quick-serve  restaurant with a  convenience-style  retail store that carries the
best health-oriented consumable products available for purchase.

PLAN OF OPERATION

On December 23, 2004 the Company's Board of Directors elected to be regulated as
a business  investment  company under the  Investment  Company Act of 1940. As a
business  development  company  ("BDC"),  the Company is required to maintain at
least 70% of its assets invested in "eligible  portfolio  companies",  which are
loosely defined as any domestic company which is not publicly traded or that has
assets less than $4 million.

As of December 29, 2004, management has recognized that there is a deficiency in
liquidity.  Such  deficiency  has  been  noted  in the  notes  to the  financial
statements  and the  audit  opinion.  To  remedy  this  situation,  the Board of
Directors  authorized  management to file Form 1-E with the Commission notifying
of its intent to sell up to $5 million of the  Company's  common  stock  under a
Regulation E exemption.

As of June 30, 2005 Franchise Capital Corporation held six portfolio  companies.
In August of 2005 the Company  sold  Fit-n-Healthy  Franchise  Company,  LLC and
presently has five portfolio investment, Fathom Business Systems, Inc., Comstock
Jakes'  Franchise  Co., LLC,  Cousin  Vinnie's  Franchise  Co., LLC, Kirby Foo's
Franchise Co., LLC and Kokopelli Franchise Co., LLC.

Currently,  there are no  commitments  for material  expenditures.  It should be
noted  that  the  Company's  auditors  Epstein,  Weber &  Conover,  P.L.C.  have
expressed in their audit opinion  letter that there is  substantial  doubt about
the Company's ability to continue as a going concern.

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial  statements present an impairment in terms of liquidity.
As of June 30, 2005 the Company had $1,026,177 in assets and the Company's total
assets exceeded total  liabilities by  approximately  $347,309.  The Company has
accumulated  $6,254,522 of net operating losses through June 30, 2005, which may
used to reduce taxes in future years  through  2022.  The use of these losses to
reduce future income taxes will depend on the  generation of sufficient  taxable
income prior to the  expiration of the net operating  loss  carry-forwards.  The
potential tax benefit of the net operating loss  carry-forwards have been offset
by a valuation allowance of the same amount. The Company has not yet established
revenues to cover its operating costs. Management believes that the Company will
soon be able to  generate  revenues  sufficient  to cover  its  operating  costs
through the acquisition of operating  subsidiaries.  In the event the Company is
unable to do so, and if suitable financing is unavailable,  there is substantial
doubt about the Company's ability to continue as a going concern.

RESULTS OF OPERATION

For the year ended June 30, 2005 the Company had a net loss of $772,517 compared
to a net loss of $5,405,130 for year ended June 30, 2004.

RECENT DEVELOPMENTS -- PORTFOLIO COMPANIES

Kokopelli  Franchise  Company,  LLC, a  portfolio  company  specializing  in the
franchising  of fast,  casual  Sonoran style food,  opened its first  franchised
restaurant in April.  We  anticipate  receiving  management  fee income from the
management  of this  location.  Also,  on  August  29,  2005  Franchise  Capital
Corporation  signed a purchase  agreement  with  Azteca  Wrap  Foods,  LLC.  The
property  acquired was an additional  fifty percent (50%)  interest in Kokopelli
Franchise Company, LLC

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

                                       10
<PAGE>
                         RISKS RELATED TO OUR BUSINESS

WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE

We have  historically  lost  money.  The  loss  for the  2005  fiscal  year  was
approximately  $772,517 and future losses are likely to occur.  Accordingly,  we
may experience  significant  liquidity and cash flow problems if we are not able
to raise additional capital as needed and on acceptable terms. No assurances can
be given  that we will be  successful  in  reaching  or  maintaining  profitable
operations.

WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS

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

THERE IS SUBSTANTIAL  DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE
TO RECURRING LOSSES AND WORKING CAPITAL  SHORTAGES,  WHICH MEANS THAT WE MAY NOT
BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING

The  report  of our  independent  accountants  on our  June 30,  2004  financial
statements   included  an  explanatory   paragraph   indicating  that  there  is
substantial  doubt  about our  ability to  continue  as a going  concern  due to
recurring  losses and working  capital  shortages.  Our ability to continue as a
going concern will be determined  by our ability to obtain  additional  funding.
Our financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.

OUR COMMON  STOCK MAY BE AFFECTED BY LIMITED  TRADING  VOLUME AND MAY  FLUCTUATE
SIGNIFICANTLY

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

OUR COMMON STOCK IS TRADED ON THE  "OVER-THE-COUNTER  BULLETIN BOARD," WHICH MAY
MAKE IT MORE  DIFFICULT FOR INVESTORS TO RESELL THEIR SHARES DUE TO  SUITABILITY
REQUIREMENTS

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

WE COULD FAIL TO RETAIN OR ATTRACT KEY PERSONNEL

Our future success depends,  in significant  part, on the continued  services of
Edward Heisler our Chief  Executive.  We cannot assure you that we would be able
to find an appropriate  replacement for key personnel.  Any loss or interruption
of our key personnel's  services could  adversely  affect our ability to develop
our business  plan.  We have no employment  agreements or life  insurance on Mr.
Heisler.

                                       11
<PAGE>
NEVADA  LAW  AND  OUR  CHARTER  MAY  INHIBIT  A  TAKEOVER  OF OUR  COMPANY  THAT
STOCKHOLDERS MAY CONSIDER FAVORABLE

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

OUR OFFICERS AND DIRECTORS  HAVE THE ABILITY TO EXERCISE  SIGNIFICANT  INFLUENCE
OVER MATTERS  SUBMITTED FOR STOCKHOLDER  APPROVAL AND THEIR INTERESTS MAY DIFFER
FROM OTHER STOCKHOLDERS

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

                       RISKS RELATED TO OUR OPERATION AS A
                          BUSINESS DEVELOPMENT COMPANY

WE MAY CHANGE OUR INVESTMENT POLICIES WITHOUT FURTHER SHAREHOLDER APPROVAL

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

OUR INVESTMENTS MAY NOT GENERATE SUFFICIENT INCOME TO COVER OUR OPERATIONS

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

ITEM 8. FINANCIAL STATEMENTS

See the financial statements annexed to this report.

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

Not applicable.

                                       12
<PAGE>
ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure  Controls and Procedures.  Based on an evaluation under
the  supervision and with the  participation  of the our management as of a date
within 90 days of the filing  date of this  Annual  Report on Form  10-K/A,  our
principal  executive officer and principal financial officer have concluded that
our  disclosure  controls  and  procedures  (as defined in Rules  13a-14(c)  and
15d-14(c)  under the  Securities  Exchange Act of 1934,  are effective to ensure
that  information  required to be  disclosed  in reports  that we file or submit
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods specified in SEC rules and forms.

Changes in Internal Controls.  There were no significant changes in our internal
controls or in other  factors that could  significantly  affect  these  controls
subsequent  to  the  date  of  their  evaluation.   There  were  no  significant
deficiencies  or material  weaknesses,  and  therefore  there were no corrective
actions  taken.  However,  the design of any system of controls is based in part
upon certain  assumptions  about the likelihood of future events and there is no
certainty  that any design will succeed in  achieving  its stated goal under all
potential future considerations, regardless of how remote.

ITEM 9B. OTHER INFORMATION

Not applicable.

                                       13
<PAGE>
                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The executive officers and directors of the Company as of September 27, 2005 are
as follows:

    Name              Age                        Position
    ----              ---                        --------
Edward Heisler        39       Chief Executive Officer, President, Chief
                               Compliance Officer, Secretary and Chairman
Janet Crance          49       Treasurer
Robert Madia          71       Director
Gordon Sales          68       Director
Robert McCoy          62       Director

The business experience of each of the persons listed above is as follows:

EDWARD HEISLER,  CHIEF EXECUTIVE OFFICER,  PRESIDENT,  CHIEF COMPLIANCE OFFICER,
SECRETARY AND CHAIRMAN,  Mr. Heisler has focused his attention on the compliance
needs of small  public  companies.  Drawing  from his  years of  experience  Mr.
Heisler has provided and  continues to provide  services  such as preparing  and
coordinating  SEC  filings,  business and business  plan  development,  investor
relations and other various consulting. As president and chief executive officer
of one publicly traded company, Mr. Heisler increased sales by 200% in his first
quarter.  While with  automotive  giant  DaimlerChrysler,  he resolved union and
management training issues, acquired millions of dollars for training from state
and  federal  sources,  facilitated  seminars  in lean  manufacturing  including
tracking techniques, communication,  cost-cutting, and enhanced productivity. He
was  also  responsible  for  the  training  of over a  thousand  DaimlerChrysler
employees.   As  Continuous  Improvement   Specialist  at  DaimlerChrysler,   he
implemented  ongoing  initiatives,  facilitated  in-plant  tracking boards,  and
developed procedures and data tracking for ISO 9002/QS 9000 compliance.

JANET CRANCE, CHIEF FINANCIAL OFFICER,  TREASURER AND DIRECTOR,  Ms. Crance, who
holds a  Bachelor's  Degree  in  Business  Administration,  has  over  27  years
experience in the accounting  profession.  She is a Certified Public  Accountant
and is President of Janet L. Crance,  PC, a public  accounting firm specializing
in small business accounting, tax compliance and business consulting.

ROBERT  MADIA,  INDEPENDENT  DIRECTOR,  Mr.  Madia  has owned  and  operated  an
insurance agency in the Pittsburgh area since 1957. The agency handles all types
of insurance for individuals  and businesses.  Along with a couple of non-profit
organizations,  he is also on the  board  of  directors  of a  large,  regional,
bottled  water  company in Virginia and North  Carolina,  Diamond  Springs Water
Company.

ROBERT  MCCOY,   INDEPENDENT  DIRECTOR,  Mr.  McCoy  is  an  experienced  senior
executive.  As president of Marquis  Elevator,  Inc. from 1975 to 1990, he built
and  then  later  sold the  largest  independent  elevator  company  in  Nevada.
Subsequent to selling  Marquis  Elevator,  Mr. McCoy was the General  Manager of
Canyon Investments,  Inc. in Las Vegas Nevada from 1990 to 1996. Since 1996, Mr.
McCoy has served as Facilities  Manager for the Church of Jesus Christ of Latter
Day Saints,  responsible  for 487,000 square feet of facilities in the Las Vegas
area. Mr. McCoy is a graduate of the University of Tennessee.

GORDON J.  SALES,  INDEPENDENT  DIRECTOR,  is the  president  and CEO of Crystal
Graphite  Corporation.  In addition,  his past experiences have included several
executive positions with various public companies. Mr. Sales brings a high level
of operating management and marketing skills, and will provide Franchise Capital
Corporation with a wealth of experience as an outside director.

MEETINGS

During  the year ended June 30,  2005 the Board of  Directors  met on twenty six
occasions.  Each incumbent Director attended at least 70% of the total number of
meetings of the Board of Directors.

COMPENSATION OF DIRECTORS

Our  independent  directors  are  compensated  $500.00 per board meeting and any
necessary  expenses to attend  meeting.  Our independent  directors  received no
other consideration in exchange for their services to the company,  nor did they
perform  any  service  that  would  fall  outside  the scope of their  duties as
directors.

                                       14
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The  following  table  sets  forth the annual  and  long-term  compensation  for
services in all capacities for the years ended June 30, 2005,  June 30, 2004 and
June 30,  2003  paid to  Bradford  Miller.  On July 13,  2005,  Bradford  Miller
voluntarily  resigned as President,  CEO and Chairman.  Effective as of the same
date, to fill the vacancies created by Bradford Miller's resignation,  the Board
of Directors  appointed  Edward Heisler to be the Company's  President,  CEO and
Chairman. No other executive officers received  compensation  exceeding $100,000
during the year ended June 30, 2005.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                  Annual Compensation                  Long Term Compensation
                                          --------------------------------    ---------------------------------------
                                                                                Awards
                                                                              ----------
                                                                  Other       Restricted    Securities
                                                                 Annual         Stock       Underlying     All Other
Name and Principal Position      Year     Salary     Bonus    Compensation     Award(s)      Options     Compensation
---------------------------      ----     ------     -----    ------------     --------      -------     ------------
<S>                              <C>     <C>          <C>         <C>         <C>          <C>          <C>
Brad Miller                      2003    $      0     $ 0         $ 0                --         --            --
President                        2004    $100,000     $ 0         $ 0         1,000,000         --            --
                                 2005    $100,000     $ 0         $ 0                --         --            --
</TABLE>

EMPLOYMENT AGREEMENTS

The Company does not currently have any employment agreements in place.

INDEMNIFICATION

As permitted by the  provisions of the General  Corporation  Law of the State of
Nevada,  the Company has the power to indemnify any person who was or is a party
or is  threatened  to be made a party to any  threatened,  pending or  completed
action,  suit  or  proceeding,   whether  civil,  criminal,   administrative  or
investigative,  by  reason of the fact  that the  person  is or was a  director,
officer,  employee or agent of the corporation if such officer or director acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best  interest  of the  Company.  Any such  person  may be  indemnified  against
expenses, including attorneys' fees, judgments, fines and settlements in defense
of any action,  suit or proceeding.  The Company does not maintain directors and
officers liability insurance.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT OF 1934

Section 16(a) of the Securities  Exchange Act of 1934 requires Franchise Capital
Corporation's  executive  officers and directors,  and persons who own more than
ten percent  (10%) of a  registered  class of  Franchise  Capital  Corporation's
equity securities,  to file an initial report of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the  Securities  and Exchange  Commission  (the
"SEC").  Such officers,  directors and ten percent (10%)  shareholders  are also
required by the SEC rules to furnish Franchise  Capital  Corporation with copies
of all Section 16(a) forms they file.

Based  solely on its  review  of the  copies of such  forms  received  by it, or
written  representations  from  certain  reporting  persons that no Forms 5 were
required for such  persons,  Franchise  Capital  Corporation  believes  that its
executive officers,  directors and ten percent (10%) shareholders  complied with
all Section 16(a) filing requirements applicable to them through the fiscal year
ended June 30, 2005, except for the following:

Robert Madia filed a Form 3 report on May 6, 2005 to report ownership of 152,245
shares of common  stock and  125,000  shares of  Franchise  Capital  Corporation
Series C preferred stock.

Bradford  Miller filed a Form 3 report on April 26, 2005 to report  ownership of
750,000 shares of Franchise Capital Corporation Series C preferred stock.

                                       15
<PAGE>
Edward  Heisler  filed a Form 3 report on April 26, 2005 to report  ownership of
253,709  shares  of  common  stock  and  450,000  shares  of  Franchise  Capital
Corporation Series C preferred stock.

Janet  Crance  filed a Form 3 report on April 26,  2005 to report  ownership  of
200,000 shares of Franchise Capital Corporation Series C preferred stock.

Alan  Smith  filed a Form 3 report on April  26,  2005 to  report  ownership  of
450,000 shares of Franchise Capital Corporation Series C preferred stock.

Robert  Madia  filed a Form 3 report on April 26,  2005 to report  ownership  of
152,245  shares  of  common  stock  and  125,000  shares  of  Franchise  Capital
Corporation Series C preferred stock.

Janet Crance  filed a Form 3 report on November 30, 2004 to report  ownership of
500,000 shares of Franchise Capital Corporation common stock.

Jerry Brown filed a Form 3 report on November  30, 2004 to report  ownership  of
2,350,000 shares of Franchise Capital Corporation common stock.

James Medeiros filed a Form 3 report on November 30, 2004 to report ownership of
1,000,000 shares of Franchise Capital Corporation common stock.

Bradford  Miller filed a Form 3 report on November 30, 2004 to report  ownership
of 1,333,333 shares of Franchise Capital Corporation common stock.

Alan Smith filed a Form 3 report on November  30,  2004 to report  ownership  of
1,166,666 shares of Franchise Capital Corporation common stock.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets  forth  information,  to the best  knowledge  of the
Company, as of September 23, 2005 with respect to each person known by Franchise
Capital  Corporation to own beneficially more than 5% of the outstanding  Common
Stock, each director and officer, and all directors and officers as a group.

<TABLE>
<CAPTION>
                                        Number of Shares                             Percentage of
Name and Address (1)                  Beneficially Owned            Class               Class (2)
--------------------                  ------------------            -----               ---------
<S>                                    <C>                    <C>                      <C>
Edward Heisler
 Chief Executive Officer, Chief             253,709          Common                        *
 Compliance Officer, Secretary and          450,000          Series C Preferred(3)         3%
 Chairman
Janet Crance
 Chief Financial Officer, Treasurer          50,000          Common                        *
 and Director                               200,000          Series C Preferred            2%
Robert Madia                                152,245          Common                        *
 Director                                   450,000          Series C Preferred            3%
Gordon Sales                                116,667          Common                        *
 Director                                   450,000          Series C Preferred            3%
Robert McCoy
 Director                                         0          Common                        *
All directors and executive                 572,621          Common                        1%
 officers (5 persons)                     1,550,000          Series C Preferred           12%
</TABLE>

----------
*   Denotes less than 1%
(1)  Unless indicated otherwise, the address for each of the above listed is c/o
     Franchise Capital Corporation at 7400 E. McDonald Suite 121, Scottsdale, AZ
     85050.
(2)  The above  percentages  are based on 68,562,852  shares of common stock and
     13,187,500  shares of Series C Preferred Stock  outstanding as of September
     23, 2005
(3)  Series C Preferred  Stock has no voting  rights,  but is  convertible in to
     common stock on a 1:1 basis and can, as a class, elect three members of the
     Board of Directors, provided that a majority of the Board is, at all times,
     independent.

                                       16
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  Company's  officers and  directors are subject to the doctrine of corporate
opportunities only insofar as it applies to business  opportunities in which the
Company has indicated an interest,  either through its proposed business plan or
by way of an express statement of interest  contained in the Company's  minutes.
If directors are presented  with business  opportunities  that may conflict with
business  interests  identified  by the  Company,  such  opportunities  must  be
promptly  disclosed to the Board of Directors and made available to the Company.
In the event the Board shall reject an opportunity  that was presented to it and
only in that  event,  any of the  Company's  officers  and  directors  may avail
themselves  of such an  opportunity.  Every  effort  will be made to resolve any
conflicts  that may arise in favor of the  Company.  There can be no  assurance,
however, that these efforts will be successful.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

The  aggregate  fees  billed  by the  Company's  auditors  for the  professional
services rendered in connection with the audit of the Company's annual financial
statements for fiscal 2005 and reviews of the financial  statements  included in
the  Company's  Forms  10-KSB for fiscal  2004 were  approximately  $19,000  and
$20,000, respectively.

AUDIT RELATED FEES

None

TAX FEES

None

ALL OTHER FEES

The  aggregate  fees billed by the  Company's  auditors for all other  non-audit
services  rendered  to  the  Company,  such  as  attending  meetings  and  other
miscellaneous  financial  consulting  in  fiscal  2005 and 2004  were $0 and $0,
respectively.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE

(a)(1)(2) FINANCIAL STATEMENTS. See index to financial statements and supporting
schedules.

(a)(3) EXHIBITS.

The following exhibits are filed as part of this statement:

The  exhibits  listed  below are required by Item 601 of  Regulation  S-B.  Each
management contract or compensatory plan or arrangement  required to be filed as
an exhibit to this Form 10-K/A has been identified.

Exhibit No.                 Description                                 Location
-----------                 -----------                                 --------
3.1      Articles of Incorporation                                           *

3.3      Amendment to articles of incorporation, dated December 16, 2004     ***

3.2      Bylaws                                                              *

14       Code of Ethics adopted December 23,2004                             **

31.1     Certification of Chief Executive Officer pursuant to Section 302    ***
         of the Sarbanes-Oxley Act of 2002

31.2     Certification of Chief Financial Officer pursuant to Section 302    ***
         of the Sarbanes-Oxley Act of 2002

                                       17
<PAGE>
32.1     Certification of Chief Executive Officer pursuant to Section 906    ***
         of the Sarbanes-Oxley Act of 2002

32.2     Certification of Chief Financial Officer pursuant to Section 906    ***
         of the Sarbanes-Oxley Act of 2002

99(i)    Audit Committee Charter adopted December 23, 2004                   **

99.2(ii) Investment Committee Charter adopted December 23, 2004              **

----------
*    Incorporated by reference from Franchise Capital Corporation's Registration
     Statement on Form SB-2 filed on October 29, 2001.
**   Incorporated  by reference  from  Franchise  Capital  Corporation's  Annual
     Report on Form 10-K for the Year Ended June 30, 2005 filed on September 30,
     2005.
***  Filed herewith.

                                   SIGNATURES

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

                                             FRANCHISE CAPITAL CORPORATION


                                             By: /s/ Edward Heisler
                                                -----------------------------
                                                Edward Heisler
                                                Chief Executive Officer
Dated: April 18, 2006

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.

SIGNATURE                                    TITLE                     DATE
---------                                    -----                     ----

/s/ Robert Madia                             Director             April 18, 2006
-----------------------------
Robert Madia

/s/ Robert McCoy                             Director             April 18, 2006
-----------------------------
Robert McCoy

/s/ Don Allio                                Director             April 18, 2006
-----------------------------
Don Allio

/s/ Donald Schwall                           Director             April 18, 2006
-----------------------------
Donald Schwall

/s/ Janet Crance                             CFO                  April 18, 2006
-----------------------------
Janet Crance

                                       18
<PAGE>
                          FRANCHISE CAPITAL CORPORATION

                              FINANCIAL STATEMENTS
                                  JUNE 30, 2005


                                    CONTENTS

                                                                     PAGE NUMBER
                                                                     -----------
Report of Independent Registered Public Accounting Firm                  F-2
Portfolio of Investments                                                 F-3
Statements of Assets and Liabilities                                     F-5
Statements of Operations                                                 F-6
Statements of Changes in Net Assets                                      F-7
Statements of Stockholders' Equity (Deficit)                             F-8
Statements of Cash Flows                                                 F-10
Notes to the Financial Statements                                        F-13


                                      F-1
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors of
Franchise Capital Corporation:

We have  audited  the  accompanying  statement  of  assets  and  liabilities  of
Franchise  Capital  Corporation  (the  "Company"),  including  the  schedule  of
investments,  as of June 30, 2005, and the related statements of operations, and
cash flows for the six months and year then ended and the  statements of changes
in net assets for each of the two years in the period ended June 30, 2005. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Standards Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  based on our audits, the financial statements referred to above
present fairly, in all material  respects,  the financial  position of Franchise
Capital  Corporation  as of June 30, 2005, and the results of its operations and
cash flows for the year then ended and the changes in its net assets for each of
the two years in the period ended June 30, 2005, in conformity  with  accounting
principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company has not yet generated  adequate cash flow to
support  its  operations.  These  matters  raise  substantial  doubt  about  the
Company's  ability to continue as a going concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

Effective  December 17, 2004, the Company as an internally  managed,  closed end
investment company elected to be treated as a business development company under
the Investment Company Act of 1940, as amended.  The financial  statements prior
to that date reflect  historically  reported  information  as not reporting as a
business  development  company.  Periods  subsequent to the  effective  date are
reported in accordance with Article 6 of Regulation S-X under the Securities Act
of  1933  and  Securities  Exchange  Act  of  1934,  and  the  Company  has  not
consolidated   portfolio  company   investments  in  which  the  Company  has  a
controlling interest.


/s/ EPSTEIN, WEBER & CONOVER, P.L.C.

Scottsdale, Arizona
September 29, 2005

                                      F-2
<PAGE>
                         FRANCHISE CAPITAL CORPORATION
                      STATEMENT OF ASSETS AND LIABILITIES

                                                                     June 30,
                                                                       2005
                                                                   ------------
ASSETS:
  Controlled Affiliated Issuers at value
   (Cost $795,000 and $0, respectively)                            $  1,014,430
   Prepaid expenses and other assets                                     11,747
                                                                   ------------
      TOTAL ASSETS                                                 $  1,026,177

LIABILITIES:
  Accounts payable and accrued expenses                            $    120,712
  Payable to shareholders                                                    --
  Note payable (See Note 4)                                             200,000
  Debentures payable (See Note 4)                                       358,156
  Minority interest                                                          --
                                                                   ------------
      TOTAL LIABILITIES                                                 678,868

NET ASSETS                                                         $    347,309

NET ASSETS CONSIST OF:
  Preferred Series B, 0 shares outstanding                         $         --
  Preferred Series C, 13,187,500 shares  outstanding                      1,319
  Paid-in capital, 32,927,305 shares outstanding                      6,600,512
  Accumulated deficit                                                (6,254,522)
                                                                   ------------

      TOTAL NET ASSETS                                             $    347,309
                                                                   ============
Shares Outstanding (5,000,000,000 of $0.0001 par
 value common stock authorized)                                      32,927,305

              Notes to Financial Statements are an integral part of
                          these Financial Statements.

                                      F-3
<PAGE>
                         FRANCHISE CAPITAL CORPORATION
                            SCHEDULE OF INVESTMENTS
                                  JUNE 30, 2005

                                                              Percent of
                                            Value             Net Assets
                                            -----             ----------
PORTFOLIO STRUCTURE

SHORT-TERM INVESTMENTS:
  None                                    $       --              --%

PRIVATE COMPANIES                          1,014,430             292%

PUBLIC COMPANIES                                  --              --%

PRIVATE INVESTMENT FUNDS                          --              --%

TOTAL INVESTMENTS                          1,014,430             292%

OTHER ASSETS & LIABILITIES (NET)            (667,121)           (192)%

    NET ASSETS                            $  347,309             100%


              Notes to Financial Statements are an integral part of
                          these Financial Statements.

                                      F-4
<PAGE>
                         FRANCHISE CAPITAL CORPORATION
                            SCHEDULE OF INVESTMENTS
                                 JUNE 30, 2005

<TABLE>
<CAPTION>
    Principal                                                       Acquisition
  Amount/Shares                                                        Date               Value
  -------------                                                        ----               -----
<S>                                                                   <C>              <C>
PRIVATE COMPANIES (1), (2) -- 292%
Common Stocks-- 100%
Restaurant companies-- 100%

Common Shares
1,000,000           Fathom Business Systems, Inc.                     12/2004          $   44,000

INVESTMENTS IN AND ADVANCES TO CONTROLLED COMPANIES:

Membership 72.50%   Comstock Jake's Franchise Co., LLC                12/2004                   -
Membership 50%      Cousin Vinnie's Franchise Co., LLC                12/2004               7,500
Membership 97.50%   Kirby Foo's Franchise Co., LLC                    12/2004               7,500
Membership 100%     Kokopelli Mexican Grill Franchise Co. LLC         12/2004             686,000
Membership 100%     Fit N Healthy Cafe                                 6/2005              50,000

ADVANCES TO CONTROLLED COMPANIES:
                    Fathom Business Systems, Inc.                                          51,520
                    Comstock Jake's Franchise Co., LLC                                     42,445
                    Cousin Vinnie's Franchise Co., LLC                                     90,623
                    Kirby Foo's Franchise Co., LLC                                         26,842
                    Kokopelli Mexican Grill Franchise Co., LLC                              8,000
                                                                                       ----------

                    TOTAL-- PRIVATE COMPANIES (Cost $512,473)                           1,014,430
                                                                                       ----------

                    TOTAL INVESTMENTS (Cost $512,473 -- 292%                            1,014,430
                                                                                       ----------

                    OTHER ASSETS & LIABILITIES (NET) -- (192)%                           (667,121)
                                                                                       ----------

                    NET ASSETS -- 100.00%                                              $  347,309
                                                                                       ----------
</TABLE>

----------
1.   Non-income producing securities only.
2.   At June  30,  2005 the  Company  owned  25% or more of each of the  private
     company's  outstanding  common  stock  thereby  making  each  a  controlled
     affiliate as defined by the  Investment  Company Act of 1940.  Total market
     value of  controlled  affiliated  securities  owned  at June  30,  2005 was
     $1,014,430.

              Notes to Financial Statements are an integral part of
                          these Financial Statements.

                                      F-5
<PAGE>
                         FRANCHISE CAPITAL CORPORATION
                      STATEMENTS OF OPERATIONS (UNAUDITED)


                                                  For the six          Year
                                                  months ended         Ended
                                                    June 30,          June 30,
                                                      2005              2005
                                                   ----------       -----------

INVESTMENT INCOME:
  Interest income                                  $       --       $        --
  Dividend income                                          --                --
                                                   ----------       -----------
Total Income                                               --                --

EXPENSES:
  Administration expenses                             750,103         1,487,848
                                                   ----------       -----------
Total Expenses                                        750,103         1,487,848

NET INVESTMENT LOSS                                  (750,103)       (1,487,848)

NET REALIZED LOSS ON INVESTMENTS                           --                --

NET UNREALIZED GAIN ON INVESTMENTS                    165,604           165,604

INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
 ACCOUNTING CHANGES                                  (584,499)       (1,322,244)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR
 CONVERSION TO A BUSINESS DEVELOPMENT COMPANY              --           549,727

NET INCREASE (DECREASE) IN NET ASSETS RESULTING
 FROM OPERATIONS                                   $ (584,499)      $  (772,517)


              Notes to Financial Statements are an integral part of
                          these Financial Statements.

                                      F-6
<PAGE>
                         FRANCHISE CAPITAL CORPORATION
                      STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
                                                               For the year ended
                                                                     June 30,
                                                              2005              2004
                                                           -----------       -----------
                                                                             Prior to BDC
<S>                                                        <C>               <C>
OPERATIONS:
  Net investment loss                                      $(1,487,848)      $        --
  Loss from operations                                              --        (5,405,130)
  Change in unrealized appreciation/depreciation               165,604
  Accounting change                                            549,727
  Net decrease in net assets resulting from operations        (772,517)       (5,405,130)

SHAREHOLDER ACTIVITY:
  Stock sales and conversion                                 1,282,027         5,242,954

NET INCREASE (DECREASE) IN ASSET VALUE                         509,510          (162,176)

NET ASSETS:
  Beginning of Period                                         (162,201)              (25)

  End of Period                                            $   347,309       $  (162,201)
</TABLE>

              Notes to Financial Statements are an integral part of
                          these Financial Statements.

                                      F-7
<PAGE>
                          FRANCHISE CAPITAL CORPORATION
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                      Prior to Effective
                                                                                         Date of BDC
                                                                                      -----------------
                                                                     For the Six        For the Six            For the
                                                                     Months Ended       Months Ended          Year Ended
                                                                    June 30, 2005     December 31, 2004     June 30, 2005
                                                                    -------------     -----------------     -------------
<S>                                                                   <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Loss                                                            $(584,499)          $(188,018)          $(772,517)
  Adjustments to reconcile net loss to net cash used
   by operating activities:
      Common stock issued as consideration for services                                     296,000             296,000
      Preferred stock issued as consideration for services                   --                  --
      Depreciation and amortization                                       1,661               5,243               6,904
      Amortization of deferred compensation                             192,000              16,000             208,000
      Amortization of beneficial conversion feature                     210,679              30,303             240,982
      Amortization of deferred financing costs                            2,666                                   2,666
      Impairment of goodwill                                                                 44,836              44,836
      Unrealized appreciation of portfolio investments                 (153,291)                               (153,291)
      Other non-cash income                                             (40,000)                                (40,000)
      Minority interest                                                                      (2,510)             (2,510)
      Expense of non-cash exercise of warrants                           25,200                                  25,200
      Cumulative effect of accounting change                                               (549,727)           (549,727)
   Changes in assets and liabilities (net of business
    acquisition)
      Prepaid expenses                                                   (6,885)            (85,086)            (91,971)
      Interest receivable                                                                        --
      Accounts receivable                                                                  (219,703)           (219,703)
      Equipment, net of accumulated depreciation                             --
      Inventories
      Deferred revenue                                                                      325,000             325,000
      Accounts payable and accrued liabilities                          (98,410)             75,335             (23,075)
                                                                      ---------           ---------           ---------
          Net Cash (Used) by Operating Activities                      (450,879)           (252,327)           (703,206)
                                                                      ---------           ---------           ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Cash invested in portfolio companies                                  (75,000)            (29,166)           (104,166)
  Purchase of computer equipment                                         (2,635)             (3,586)             (6,221)
  Advances to affiliates/officers                                        (2,350)                                 (2,350)
  Repayment of advances to affiliates                                    83,960                                  83,960
  Investment in franchise development                                        --                  --
                                                                      ---------           ---------           ---------
          Net Cash Provided by(Used) by Investing Activities              3,975             (32,752)            (28,777)
                                                                      ---------           ---------           ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Common stock issued for cash                                          345,500                                 345,500
  Bank overdraft                                                         13,476                                  13,476
  Proceeds from shareholder advances                                                         (8,647)             (8,647)
  Repayments of notes payable and convertible debentures                (35,000)                                (35,000)
  Proceeds from notes payable                                           120,715             249,938             370,653
                                                                      ---------           ---------           ---------
          Net Cash Provided by Financing Activities                     444,691             241,291             685,982
                                                                      ---------           ---------           ---------

INCREASE (DECREASE) IN CASH AND EQUIVALENTS                              (2,213)            (43,788)            (46,001)

CASH AND EQUIVALENTS, BEGINNING OF PERIOD                                 2,213              46,001              46,001
                                                                      ---------           ---------           ---------
CASH AND EQUIVALENTS, END OF PERIOD                                   $      --           $   2,213           $      --
                                                                      =========           =========           =========
</TABLE>
              Notes to Financial Statements are an integral part of
                          these Financial Statements.

                                      F-8
<PAGE>
                          FRANCHISE CAPITAL CORPORATION
                            STATEMENTS OF CASH FLOWS
                                   (CONTINUED)

                                                        For the year ending
                                                              June 30,
                                                       2005              2004
                                                     --------          --------
SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid                                      $     --          $     --
                                                     ========          ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
  Common stock issued for business acquisitions
   and franchise rights                              $     --          $255,000
                                                     ========          ========
  Note payable issued for 50% interest in
  portfolio company                                  $200,000          $     --
                                                     ========          ========

  Debt converted to Equity                           $ 62,500          $     --
                                                     ========          ========

              Notes to Financial Statements are an integral part of
                          these Financial Statements.

                                      F-9
<PAGE>
                          FRANCHISE CAPITAL CORPORATION

                      NOTES TO AUDITED FINANCIAL STATEMENTS
                       FOR THE PERIOD ENDED JUNE 30, 2005


1. ORGANIZATION AND BASIS OF PRESENTATION

Franchise  Capital  Corporation  (the  "Company")  a  Nevada  corporation,   was
incorporated  on July 6, 2001.  The Company was formerly  named Cortex  Systems,
Inc.  In December of 2004 the  Company  changed  its name to  Franchise  Capital
Corporation,  to more accurately  reflect its true business nature.  The Company
invests in developing and franchising casual dining restaurants.  The Company is
seeking to acquire additional  investments within this industry and has acquired
the rights to five concepts. To date, the Company has had no revenues associated
with these activities. Effective December 17, 2004, the Company as an internally
managed,  closed  end  investment  company  elected  to be treated as a business
development company under the Investment Company Act of 1940, as amended.

As a  business  development  company,  we  provide  long-term  debt  and  equity
investment  capital to support the  expansion of  companies in the casual,  fast
food restaurant industry. We generally invest in private, small to middle market
companies  that lack  access to public  capital or whose  securities  may not be
marginable.  Today, our investment and lending activity is generally  focused in
private finance.

The  Company  serves as a holding  company  for its  wholly and  majority  owned
operating  subsidiaries;  Fathom Business  Systems,  Inc.  ("Fathom"),  Comstock
Jake's  Franchise   Company,   ("Comstock's"),   Kokopelli   Franchise  Company,
("Kokopelli"), Cousin Vinnie's Franchise Company ("CV"), Kirby Foo's Asian Grill
Franchise Company  ("Kirby"),  and Fit N Healthy Cafe . The Company owns 100% of
Fathom and  Kokopelli  and has  ownership  interests  in Kirby of  approximately
97.5%, 72.5% of Comstock Jake's, 100% of Fit N Healthy, and 50% of CV.

The Company faces many operating and industry challenges. There is no meaningful
operating history to evaluate the Company's prospects for successful operations.
Future losses for the Company are  anticipated.  The proposed plan of operations
would  include  seeking  an  operating  entity  with  which  to  merge.  Even if
successful,  a merger may not  result in cash flow  sufficient  to  finance  the
continued expansion of a business.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  The Company has  incurred  material
operating losses, has continued operating cash flow deficiencies and has working
capital deficit at June 30, 2005.  These factors raise  substantial  doubt about
the Company's ability to continue as a going concern.  The Company believes that
it will be successful in franchising  its restaurant  concepts which will result
in up front franchise fees and ongoing monthly royalties.  However,  the Company
will likely require  additional debt or equity capital in order to implement its
business plan. The accompanying consolidated financial statements do not include
any adjustments that might result from this uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION -

Franchise  Capital  Corporation  changed  to  a  Business  Development  Company,
effective December 17, 2004. Therefore, the prior periods are no longer directly
comparable.  The balance  sheet as of June 30, 2005, is presented to reflect the
change to a BDC. The  statements of operations for the periods prior to December
31, 2004, are presented as if the all of the Company's  portfolio  companies are
consolidated through the last day of the period.

                                      F-10
<PAGE>
As a result of the Company  converting to a Business  Development  Company,  the
Company changed its accounting principles. The primary difference relates to the
accounting for investments.  The investments that were previously  consolidated,
are now reflected at the estimated fair value of those investments.  The Company
estimated that the  investments at cost  approximate  fair value.  The effect of
recoding those investments at the original cost and adjusting for the previously
recorded consolidated net losses of those investments was $549,727.

The  accompanying  consolidated  financial  statements  prior to  becoming a BDC
contain  the  accounts  of  the  Company  and  its  wholly  and  majority  owned
subsidiaries,  Fathom,  IFS,  Pauli's,  Kokopelli,  CV and Kirby.  All  material
inter-company  balances and transactions  have been eliminated in consolidation.
The  accompanying  consolidated  statement of operations  includes the operating
activity of the subsidiaries from the respective dates of acquisition.

CASH AND CASH  EQUIVALENTS - Cash and cash  equivalents  include all  short-term
liquid  investments  that are readily  convertible  to known amounts of cash and
have original maturities of three months or less.

REVENUE  RECOGNITION  - For periods  prior to  December  31,  2004,  revenue was
recognized on hardware and installation of point-of-sale systems when the system
has been installed and the Company has received customer acceptance and there is
no material  ongoing  commitment  on the part of the  Company.  Cost of revenues
includes the cost of hardware items and labor.

ACCOUNTS RECEIVABLE - Prior to December 31, 2004, accounts receivable  consisted
primarily of amounts due from  customers  of Fathom's  Point of Sale systems and
implementation projects. The Company has receivables from affiliates at June 30,
2005 of $219,430. These advances generally have no specific repayment terms. The
Company  analyzes these  receivables  periodically  to determine if there is any
impairment  of such.  This  analysis  includes an  assessment  of the  portfolio
companies'  ability to repay. The Company has a controlling  interest in most of
the portfolio companies.

INCOME TAXES - The Company  provides for income taxes based on the provisions of
Statement of  Financial  Accounting  Standards  No. 109,  ACCOUNTING  FOR INCOME
TAXES,  which among other things,  requires that  recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date of
financial statements.

USE OF ESTIMATES - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles 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 the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

PROPERTY AND EQUIPMENT - consists  primarily of office equipment and furnishings
and is stated at cost less accumulated depreciation. Depreciation is recorded on
a straight-line basis over the estimated useful lives of the assets ranging from
3 to 5 years.  Depreciation  expense was  $6,094,  $7,962 and $-0- for the years
ended June 30, 2005, 2004 and 2003, respectively.

STOCK-BASED COMPENSATION - Statements of Financial Accounting Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, ("SFAS 123") established accounting and
disclosure  requirements  using a  fair-value  based  method of  accounting  for
stock-based employee compensation.  In accordance with SFAS 123, the Company has
elected to continue  accounting for stock based compensation using the intrinsic
value  method  prescribed  by  Accounting   Principles  Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees."

There were no options granted in the years ended June 30, 2005 and 2004.

                                      F-11
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -

In December  2002,  the FASB issued SFAS No.  148,  Accounting  for  Stock-Based
Compensation - Transaction and Disclosure, which provides alternative methods of
transition  for a voluntary  change to fair value based method of accounting for
stock-based  employee  compensation  as prescribed in SFAS 123,  Accounting  for
Stock-Based Compensation. Additionally, SFAS No. 148 requires more prominent and
more  frequent   disclosures  in  financial  statements  about  the  effects  of
stock-based  compensation.  The  provisions of this  statement are effective for
fiscal years ending after December 15, 2002, with early application permitted in
certain  circumstances.  The Company presently does not intend to adopt the fair
value based method of accounting for its stock based compensation.

In June  2003 the  FASB  issued  Statement  No.  150,  "Accounting  for  Certain
Financial  Instruments with Characteristics of both Liabilities and Equity" SFAS
No. 150 requires certain instruments,  including mandatorily  redeemable shares,
to be  classified  as  liabilities,  not as  part  of  shareholders'  equity  or
redeemable  equity.  For instruments that are entered into or modified after May
31, 2003, SFAS No. 150 is effective immediately upon entering the transaction or
modifying the terms.  For other  instruments  covered by Statement 150 that were
entered  into  before June 1, 2003,  Statement  150 is  effective  for the first
interim  period  beginning  after June 15, 2003.  The Company has  evaluated the
provisions of SFAS No. 150 and implementation of such was not material.

In  January  2003,  the FASB  issued  FASB  Interpretation  No.  46 ("FIN  46"),
Consolidation of Variable  Interest  Entities,  an Interpretation of ARB No. 51.
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective  for all new  variable  interest  entities  created or acquired  after
January 31, 2003. For variable  interest  entities  created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period  beginning  after June 15, 2003. The adoption of FIN 46 did not
have an impact on the Company's financial position or results of operations.

In  December  2004  the  FASB  issued  a  revised  Statement  123  (SFAS  123R),
"ACCOUNTING FOR STOCK-BASED  COMPENSATION"  requiring public entities to measure
the cost of  employee  services  received  in  exchange  for an award of  equity
instruments based on grant date fair value. The cost will be recognized over the
period  during which an employee is required to provide  service in exchange for
the award -- usually the vesting period. The Company is evaluating the impact of
this new  pronouncement  and does not expect the effect of  implementation  will
have a significant impact on the Company's financial statements.

3. BUSINESS ACQUISITIONS

In the year ended June 30,  2004,  the  Company  entered  into an  agreement  to
acquire all of the outstanding  voting shares of Fathom Business  Systems,  Inc.
("Fathom").  Fathom  specializes  in  the  sale,  installation  and  service  of
restaurant `Point-of-Sale' equipment. Fathom was a single employee business. The
Company  issued  750,000  shares  of its  common  stock  to  acquire  all of the
outstanding shares of Fathom. On the basis of the trading price of the Company's
common stock at the time of the  acquisition,  the purchase  price was $225,000.
The purchase price was allocated as follows:

      Cash                         $   3,619
      Accounts receivable             10,232
      Inventory                       13,567
      Accounts payable               (72,963)
      Intangible assets              270,545
                                   ---------
                                   $ 225,000
                                   =========

                                      F-12
<PAGE>
All revenue recognized in the accompanying  statement of operations for the year
ended  June 30,  2004,  relates  to sales and  services  provided  by the Fathom
subsidiary.  In  connection  with this  acquisition,  the Company  allocated the
purchase  price in excess of the  tangible  assets and  liabilities  acquired as
goodwill.  The  Company  determined  that  the  excess  purchase  price  was not
specifically  connected  with  such  things  as  tradenames,  customer  lists or
existing  contracts.  If the acquisition of Fathom had occurred on July 1, 2003,
the  consolidated  revenues  and net loss of the Company for the year ended June
30, 2004 would have been  approximately  $126,000  and  $5,118,000  respectively
(unaudited).

In the year ended June 30,  2004,  the  Company  entered  into an  agreement  to
acquire all of the  outstanding  voting shares of Deville,  Inc., a developer of
"LUCKY LOU'S"  restaurants.  The terms of the purchase  agreement,  required the
issuance of 1,000,000 of the  Company's  common shares and a note payable with a
face  amount  of  $400,000.  The note was  discounted  at 8% on the basis of its
repayment  terms  resulting in a principal  amount of  $349,805.  The terms also
called for an ongoing payment to the seller based on royalty revenues  generated
from  "LUCKY  LOU'S"  restaurants.  The  total  purchase  price of  Deville  was
$649,805. There were no tangible assets or liabilities acquired in the purchase.
In  March,  2004,  the  Company  and  Deville,   Inc.,  agreed  to  rescind  the
transaction.  Accordingly,  the shares were  returned to the  Company,  the note
payable and the net assets of Deville were reversed and removed from the balance
sheet at June 30, 2004.

In the year ended June 30, 2004,  the Company  entered  into various  agreements
with American Restaurant  Development Corp. ("ARDC"),  an entity controlled by a
significant shareholder of the Company. As of June 30, 2004 the shareholder held
a beneficial  interest in the Company totaling 11%. The Company  contracted with
ARDC to provide restaurant concepts for franchising. For each concept introduced
to the Company,  ARDC is to receive 500,000 shares of the Company's common stock
and $125,000,  $75,000 of which is paid  immediately  and the $50,000 balance as
cash is received by the Company for  franchise  fees  realized by the Company on
such  concepts.  In  addition,  ARDC  is to  receive  50% of all  non-refundable
payments   received  by  the  Company  for  new  franchise  and  area  developer
agreements.  Additionally,  ARDC will receive  royalties  equal 1% of the system
wide revenues of each  concept.  During the year ended June 30, 2004, a total of
2,000,000  shares of the  Company's  common  stock  were  issued to ARDC and the
Company incurred $300,000 in fees for the four franchise concepts brought to the
Company by ARDC.

In the year ended June 30, 2004, the Company  entered into operating  agreements
for three of the concepts  (Pauli's,  Kokopelli,  and CV) with the owners of the
exclusive rights to the names, trademarks,  menus, operating systems and recipes
for the  concepts.  The Company will provide the monies needed to start the sale
of the  franchises  and  other  operating  services  for its 72.5%  interest  in
Pauli's,  50%  interest in  Kokopelli  and 50% interest in CV. As of the date of
this report,  no monies had been contributed by the Company to the operations of
these three limited liability franchise companies.

4. INTANGIBLE ASSETS

In  connection  with the Company's  acquisition  of Fathom and sale of franchise
rights to the Pauli's and Kirby franchises, intangible assets were recorded.

The Company allocated $270,545 of its purchase price of Fathom to goodwill.  The
Company does not amortize goodwill,  and instead annually evaluates the carrying
value of goodwill for  impairment.  The Company  believes that there has been no
impairment of the carrying value of goodwill of $270,545 as of June 30, 2004.

The Company  acquired its interests in Pauli's and Kirby through the issuance of
100,000  shares  valued  at  approximately   $15,000.   As  a  result  of  these
transactions,  Pauli's and Kirby have capitalized the $18,037 cost of intangible
assets  such as  tradenames,  franchise  rights,  menus,  etc.  The  Company  is
amortizing these assets on a straight line basis over the estimated useful lives
of ten years.  Amortization expense for these assets was not material during the
year ended June 30, 2004.

                                      F-13
<PAGE>
5. INVESTMENT PORTFOLIO

In the year ended June 30, 2005, the Company  entered into operating  agreements
for five restaurant  concepts (Comstock Jake's,  Kokopelli,  CV, Kirby and Fit N
Healthy)  with the  owners of the  exclusive  rights to the  names,  trademarks,
menus,  operating systems and recipes for the concepts. The Company will provide
the  monies  needed to start  the sale of the  franchises  and  other  operating
services for its 72.5% interest in Comstock Jake's,  100% interest in Kokopelli,
50% interest in CV, 100%  interest in Kirby and 100%  interest in Fit N Healthy.
As of June 30,  2005,  the  Company  has  invested  $219,430  in advances to the
companies. The estimated fair value of the portfolio companies was $795,000.

As a business  development company under the Investment Company Act of 1940, all
of the  Company's  investments  must be carried at market value or fair value as
determined by our Board of Directors for  investments  which do not have readily
determinable  market  values.  Most of the  Company's  assets  were  acquired in
privately  negotiated  transactions  and  have no  readily  determinable  market
values. These securities are carried at fair value as determined by the Board of
Directors under our valuation policy.  Currently,  our valuation policy provides
for obtaining  independent  business valuations for those equity securities that
are not traded on a national securities exchange.

With respect to private equity  securities,  investments are valued as indicated
above by a  independent  business  valuation  company using  industry  valuation
benchmarks,  and then the value is assigned a discount  reflecting  the illiquid
nature  of the  investment,  as well as a  minority,  non-control  position,  if
applicable.  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 our private equity valuation. At June
30, 2005, the fair values of Comstock Jake's,  Kokopelli, CV and Fathom Business
systems was determined by a by a independent  business valuation company. OF the
Company's investments, only Kokopelli and Fathom have operations.  Kokopelli has
begun to sell  franchises and Fathom has been  operating  since it was acquired.
The  investment in Fit N Healthy was effective June 30, 2005. The value of Fit N
Healthy was determined based on the sale price of that investment which occurred
in August of 2005.

During the year ended June 30, 2005,  the Company  wrote down its  investment in
Fathom by $293,480. During the year ended June 30, 2005, the Company reported an
unrealized gain o its investment in Kokopelli by approximately $459,000.

6. CONVERTIBLE DEBENTURES PAYABLE

Debentures payable as of June 30, was comprised of the following:

<TABLE>
<CAPTION>
                                                                    2005            2004
                                                                 ---------       ---------
<S>                                                              <C>             <C>
Debenture payable from an individual maturing February 2005
Debenture payable $55,000, interest at 12% per annum,
Interest due quarterly                                           $  40,000       $      --

Debenture payable from an individual maturing January 30, 2005
Debenture payable $50,000, interest at 12% per annum,
Interest due quarterly                                              15,000

                                      F-14
<PAGE>
Debenture payable from an individual maturing Dec 1, 2005
Debenture payable $50,000, interest at 10% per annum
Interest due quarterly                                              50,000

Debenture payable from an individual maturing April 2005
Debenture payable $25,000, interest at 8% per annum
Interest due quarterly                                              20,500

Debenture payable from an individual maturing April 2005
Debenture payable $25,000, interest at 8% per annum
Interest due quarterly                                              15,500

Debenture payable from a company maturing June 2006
Debenture payable $250,000, interest at 7.5% per annum
Interest due monthly                                               228,927         127,500

Debenture payable from a company maturing September 2005
Debenture payable $35,000, interest at 8% per annum
Interest due monthly                                                17,550
                                                                 ---------       ---------

         Total                                                     387,477         127,500
                                                                 ---------       ---------

      Less: Debt discount                                          (29,321)
                                                                 ---------       ---------
                                                                 $ 358,156       $ 127,500
                                                                 =========       =========
</TABLE>

Principal payments due as follows:

Years ended June 30:            2006                             $387,477
                                2007                                   --
                                2008                                   --
                                2009                                   --
                                2010                                   --
              Thereafter                                               --
                                                                 --------

                                                                 $387,477
                                                                 ========

The Company is attempting to restructure repayment or induce conversion of these
obligations.  Many of these  obligations  were in default as the maturity  dates
have lapsed. During the year ended June 30, 2005, the Company amended conversion
rights on all of the convertible  debentures other than the $228,927  debenture.
The conversion  rate was reduced to $0.005.  The Company  recorded an expense of
$99,879 in the year ended  June 30,  2005,  resulting  from  changes  made as an
inducement  for  conversion.  During the year ended  June 30,  2005,  holders of
convertible debt converted $62,500 of principal to common stock.

During  the year  ended  June  30,  2004,  the  Company  issued  a  2-year  7.5%
convertible debenture to Golden Gate Investors,  Inc. "Golden Gate" amounting to
$85,000 with interest  payable  monthly and due June 9, 2006. The debenture also
included non-detachable warrants for 2,500,000 shares of common stock.

                                      F-15
<PAGE>
The debenture may be converted at the option of the holder into common shares of
the Company.  The conversion  price is the lesser of $0.25 or 80% of the average
of the five lowest  volume  weighted  average  price  during the 20 trading days
prior  to  the   election  to  convert.   Upon   conversion,   the  holder  must
simultaneously  purchase shares of the Company's common stock in a dollar amount
equal to 10 times the dollar  amount of the  debenture  converted.  The purchase
price for such shares shall be the same as the debenture  conversion  price. The
value of the beneficial conversion feature of $21,212 was recorded as a discount
to the principal balance of the debenture and amortized  immediately as interest
expense  because the debenture is  convertible  at any time at the option of the
holder.

The Company  defaulted  on the interest  payment  provisions  in the  debenture.
Consequently,  the principal  amount due under the  debenture of $85,000  became
immediately  due and payable in cash plus a default  penalty of $42,500 (150% of
the principal  amount)  resulting in a total obligation of $127,500 plus any and
all accrued  interest.  The per diem interest is $26.04.  The default penalty of
$42,500  was  expensed  as  interest  and  financing  costs in the  accompanying
statement of operations for the year ended June 30, 2004.

The effective  annual interest rate on the debenture is  approximately  24% when
the beneficial  conversion  feature is considered and approximately 48% when the
beneficial  conversion  feature and the penalty  interest are considered.  As of
June 30, 2005, we currently owe $228,907.

Subsequent to June 30, 2005, the Company contacted Golden Gate regarding what we
believe  may be  securities  law  violations  in  connection  with  transactions
involving the  convertible  debenture and its related  warrants and  agreements.
Among other things,  the Company believes Golden Gate violated Section 16 of the
Securities  Exchange Act of 1934 when they converted nearly 12% of the Company's
outstanding  shares and immediately resold shares in the market. The Company has
terminated  all  agreements  with Golden Gate,  and is currently  seeking  legal
counsel to advise it  regarding  pursuing  Golden Gate for short  swing  profits
resulting from the purchase and sale of shares.

On  October  14,  2004 the  Company  issued a six  month  convertible  debenture
amounting  to  $25,000,  with  interest  payable  at the  end of the  term.  The
debenture may be converted,  at the option of the holder,  into common shares of
the  Company.  The  conversion  price is 50% of the  closing  bid on the day the
Company  receives notice of conversion.  The debenture may be converted,  at the
option of the Company,  into common shares of the Company.  The conversion price
is 50% of the closing bid on the day the Company  receives notice of conversion.
As of June 30, 2005 a total of  1,900,000  shares of common stock were issued as
partial redemption of this debenture. Total balance at June 30, 2005 is $15,500,
and as of July 12, 2005 this debenture was paid in full.

On  October  4,  2004,  the  Company  issued a six month  convertible  debenture
amounting  to  $25,000,  with  interest  payable  at the  end of the  term.  The
debenture may be converted,  at the option of the holder,  into common shares of
the  Company.  The  conversion  price is 50% of the  closing  bid on the day the
Company  receives notice of conversion.  The debenture may be converted,  at the
option of the Company,  into common shares of the Company.  The conversion price
is 50% of the closing bid on the day the Company  receives notice of conversion.
As of June 30,  2005 a total of 900,000  shares of common  stock were  issued as
partial redemption of this debenture. Total balance at June 30, 2005 is $20,500,
and as of July 21, 2005 this debenture was paid in full.

On December 1, 2004,  the Company  issued a twelve month  convertible  debenture
amounting to $50,000,  with interest of $1,250 payable quarterly beginning March
1, 2005.  The  debenture  may be  converted,  at the option of the holder,  into
common shares of the Company.  The conversion price is 50% of the closing bid on
the  day the  Company  receives  notice  of  conversion.  The  debenture  may be
converted,  at the option of the Company, into common shares of the Company. The
conversion  price  is 50% of the  closing  bid on the day the  Company  receives
notice of conversion. On August 15, 2005 we sold a portfolio investment,  and as
part of the negotiated sales price, this debenture was assumed by the buyer.

                                      F-16
<PAGE>
On January 17,  2005 the Company  issued a twelve  month  convertible  debenture
amounting  to  $35,000,  with  interest  payable  at the  end of the  term.  The
debenture may be converted,  at the option of the holder,  into common shares of
the  Company.  The  conversion  price is 50% of the  closing  bid on the day the
Company  receives notice of conversion.  The debenture may be converted,  at the
option of the Company,  into common shares of the Company.  The conversion price
is 50% of the closing bid on the day the Company  receives notice of conversion.
Total  balance  at June  30,  2005 is  $17,550,  and as of July  13,  2005  this
debenture was paid in full.

On July  21,  2004 the  Company  issued a  twelve  month  convertible  debenture
amounting to $50,000,  with  interest  payable  monthly.  The  debenture  may be
converted,  at the option of the holder, into common shares of the Company.  The
conversion  price  is 50% of the  closing  bid on the day the  Company  receives
notice of  conversion.  The  debenture  may be  converted,  at the option of the
Company,  into common shares of the Company.  The conversion price is 50% of the
closing bid on the day the Company receives notice of conversion.  Total balance
at June 30, 2005 is $15,000,  and as of July 31, 2005 this debenture was paid in
full.

For the  debentures  issued in the  period  ended  June 30,  2005,  the  Company
computed the beneficial conversion feature to be equal to the face amount of the
debentures. The $244,410 discount is being amortized over the terms of the debt.
During the year ended June 30,  2005,  $215,089 of the  discount  was  amortized
leaving a remaining discount of $29,321.

Convertible  debt  outstanding at June 30, 2005 is convertible  into  60,325,875
shares of common stock.

7. NOTES PAYABLE

Notes payable as of June 30, was comprised of the following:

                                                       2005               2004
                                                       ----               ----

Note payable to former partial owner of Kokopelli
Note is payable $200,000 and bears interest at
prime and is collateralized by 50% interest in
Kokopelli, payable in 12 quarter installments of
$16,667 commencing in November 2005.                 $200,000

Loan from an individual maturing June 30, 2007
Note payable $50,000, interest at 12% per annum,
Interest due quarterly.                                                 $50,000

Loan from an individual maturing June 30, 2007
Note payable $50,000, interest at 12% per annum,
Interest due quarterly.                                                  50,000
                                                     --------          --------
         Total                                        200,000           100,000

Less Current portion                                   50,000                --
                                                     --------          --------

Long-term portion                                    $150,000          $100,000
                                                     ========          ========

                                      F-17
<PAGE>
8. INCOME TAXES

The  Company  recognizes  deferred  income  taxes  for the  differences  between
financial  accounting and tax bases of assets and liabilities.  Income taxes for
the years ended June 30, consist of the following:

                                          2005           2004           2003
                                      -----------    -----------    -----------
Current tax provision (benefit)       $ 2,551,795    $(2,166,000)   $    (5,900)
Deferred tax provision (benefit)       (2,551,795)     2,166,000          5,900
                                      -----------    -----------    -----------

Total income tax provision (benefit)  $         0    $         0    $         0
                                      ===========    ===========    ===========

There was a deferred tax asset of $2,776,000 and $2,178,000 at June 30, 2005 and
2004,  respectively,  relating  primarily to net operating loss carryforwards of
approximately  $2,689,000 and $223,000,  differences in the income tax treatment
of certain  stock based  compensation  of $86,000 and  $1,953,000  and  book/tax
differences  in the bases of property and equipment of $2,000 and $2,000 at June
30, 2005 and 2004 respectively. The deferred income tax asset is fully offset by
a valuation  allowance of  $2,690,378  and  $2,178,000 at June 30, 2005 and 2004
respectively.  The valuation  allowance was increased by $512,000 and $2,166,000
in the years ended June 30, 2005 and 2004  respectively.  At June 30, 2005 there
were  federal  and state  net  operating  loss  carryforwards  of  approximately
$6,770,000 which begin to expire in 2021 and 2008 respectively.

     A  reconciliation  of the  differences  between the effective and statutory
     income tax rates for years ended June 30, is as follows:

<TABLE>
<CAPTION>
                                            2005                        2004                    2003
                                            ----                        ----                    ----
<S>                               <C>            <C>        <C>              <C>        <C>          <C>
Federal statutory rates           $(245,316)     (34)%      $(1,738,866)     (34)%      $(5,902)     (15)%
State income taxes                  (43,291)      (6)%         (306,859)      (6)%        - 0 -       --%
Increase in valuation allowance     512,378       71%         2,044,682       40%         5,902       15%
Effect of accounting change        (219,891)     (30)%
Other                                (3,880)      (1)%            1,043       --              0       --%
                                  ---------     ----        -----------     ----        -------     ----
Effective rate                    $       0        0%       $         0        0%       $     0        0%
                                  =========     ====        ===========     ====        =======     ====
</TABLE>

9. STOCKHOLDERS' EQUITY

The Company  declared a 6 for 1 stock split during the year ended June 30, 2003.
Additionally,  The Company  declared a 1 for 10 reverse  stock split in the year
ended  June 30,  2005.  The  number  of  shares  presented  in  these  financial
statements  has been  retroactively  restated  for all  periods to reflect  this
reverse stock split.

In July 2003,  the  Company  amended it  Articles  of  Incorporation  to reflect
100,000,000  authorized  shares of Common Stock having a par value of $0.001 and
1,125,000  shares of Preferred  Stock having a $10.00 par value for  Preferred A
and $0.001 par value for Preferred B. The authorized number of Class A Preferred
Stock authorized to be issued is 125,000 shares with voting rights equivalent to
five votes per share of Class A Preferred  Stock. The Class A Preferred Stock is
cumulative, with an annual dividend of 6%. Additionally, Class A Preferred Stock
shall be  convertible  into five shares of common stock of the Company for every
one Class A Preferred  share.  The authorized  number of Class B Preferred Stock
authorized  to be issued is  1,000,000  shares.  Each share of Class B Preferred
Stock shall be entitled to voting rights  equivalent to one vote.  Additionally,
50% of the Class B Preferred Stock may be converted after 50 franchise units are
sold and the remaining 50% may be converted after 50 additional  franchise units
are sold.

In August  2003,  the Company  sold  275,000  common  shares,  plus  warrants to
purchase  137,500  shares at a price of $0.50  per  share  for a total  price of
$55,000.

                                      F-18
<PAGE>
In  September  2003,  the Company  approved a 2003 Stock  Compensation  Plan for
1,000,000  shares to compensate  employees  and  consultants.  In addition,  the
Company  entered into an  agreement  with a  consultant  whereby the  consultant
received 350,000 shares of the Company's common stock for services rendered.

In October  2003,  the Company  entered  into an agreement to acquire all of the
outstanding shares of "ICEBERG FOOD SYSTEMS,CORP." ("IFSC"). IFSC was owned by a
former  officer and  director  of the  Company.  The only  holdings of IFSC were
30,000,000 shares of the Company's common stock. As part of the agreement,  IFSC
distributed  14,465,000 shares of the Company's common stock to its shareholder.
IFSC then became a wholly owned subsidiary of the Company with its only holdings
being  the  remaining   15,535,000   shares  of  the  Company's   common  stock.
Effectively,  the  transaction  was an  acquisition  of  treasury  stock  by the
Company.  In exchange,  the Company  assumed a commitment  to raise  capital and
develop the Iceberg  Drive-In  concept.  The rights to develop that concept were
previously  held by IFSC.  The  Company was to assist  IFSC in  providing  up to
$1,130,000.  The Company  accounted for this  transaction  as an  acquisition of
treasury   stock  through  the  issuance  of  a  note  payable  of   $1,130,000.
Subsequently, the note payable and an additional 1,125,000 shares were cancelled
for a total of 16,660,000 shares of common stock returned to the Company.

In November 2003, the Company  acquired Fathom Business  Systems in exchange for
750,000  shares of the  Company's  restricted  common  stock valued at $225,000.
Other stock transactions in November 2003 included the issuance of 10,000 shares
of  Class B  Convertible  Preferred  stock  valued  at  $3,800,000  to 18 of the
Company's  existing   shareholders,   employees  and  consultants  for  services
rendered;  an agreement with a  non-affiliate  to acquire rights to a restaurant
concept in return for 1,000,000  shares of the Company's common stock and a note
payable for $400,000;  and agreements with  consultants  whereby the consultants
were issued 600,000 shares (100,000 and 500,000  respectively)  of the Company's
common stock for services to be rendered.  The  agreement  for the rights to the
restaurant concept and the agreement with the consultant for 500,000 shares were
later rescinded, the shares were returned and the note payable was cancelled.

In January 2004, the Company approved a Company  Qualified Stock Option Plan for
4,000,000 shares of common stock to compensate  employees.  As of the year ended
June 30, 2004 no stock  options had been granted  under the Plan.  Subsequent to
June 30, 2004,  the Company  approved  increasing  the total number of shares of
common stock under the Plan to 15,000,000  with  5,000,000 of those shares to be
registered  immediately.  Other stock  transactions  in January 2004 included an
agreement with a consultant  whereby the consultant  received  650,000 shares of
the Company's common stock for services rendered and a consulting agreement with
a related  party  whereby the Company  will receive six  restaurant  concepts in
exchange for 500,000 shares of the Company's  common stock for each concept.  As
of June 30, 2004 four concepts had been delivered to the Company and the Company
had issued  2,000,000  shares of common  stock to the  related  party  valued at
$375,000.

In February  2004,  the Company sold 140,000  common  shares,  plus  warrants to
purchase  140,000  shares at a price of $0.50  per  share  for a total  price of
$35,000 and the Company entered into an agreement with a consultant to assist in
raising capital for the Company.  The Company will pay the consultant 10% of all
funds raised, in cash, and 10% of all stock issued to investors.  As of June 30,
2004 the Company had issued 14,000 shares of common stock to the  consultant and
owed finder's fees totaling $3,500.

In March 2004, the Company entered into consulting  agreements in exchange for a
total of 900,000 shares of common stock. Additionally,  the Company entered into
an employment agreement in which part of the compensation was paid in stock. The
employee received 1,000,000 shares of common stock. The 1,000,000 shares must be
returned  if the  employee  leaves  within  90 days or  800,000  shares  must be
returned if the employee leaves within one year of the date of the agreement.

                                      F-19
<PAGE>
In April  2004,  the  Company  approved  the  issuance  of a stock  dividend  to
shareholders  of record on May 15, 2004. The stock dividend  provided the Common
Stock  shareholders  with one share for every  three  shares  held.  Other stock
transactions  in April 2004  included the  issuance of 200,000  shares of common
stock in exchange for advisory services rendered; the issuance of 100,000 shares
of common stock valued at $15,000 for additional interests in Pauli's and Kirby;
and an agreement  with a related party for consulting  services.  As part of the
related  party  agreement  the  affiliate  would  receive  30,000  shares of the
Company's  Series B Convertible  Preferred Stock. The agreement for the issuance
of the Series B stock was  rescinded  subsequent  to June 30,  2004.  The 30,000
shares were never issued.

In June 2004, the Company entered into an employment  agreement in which part of
the  compensation is paid in stock.  The employee  received  1,000,000 shares of
common  stock.  The  1,000,000  shares must be returned if the  employee  leaves
within 90 days or 800,000 shares must be returned if the employee  leaves within
one year of the date of the agreement.  Additionally, a second employee received
500,000 shares of common stock for their services to the Company.  There were no
restrictions on these shares.  Other stock transactions in June 2004 included an
agreement  with an attorney for legal services in exchange for 800,000 shares of
the common stock.

During the year ended June 30, 2005, the Company issued  $357,500 in the form of
convertible  debentures,  with  interest  payable  at the end of the  term.  The
debentures may be converted,  at the option of the holder, into common shares of
the Company at a  conversion  price of 50% of the closing bid for the  Company's
common stock on the date of conversion. During the year ended June 30, 2005, the
Company  converted  $67,450  of  these  convertible  debentures  for a total  of
16,950,909 shares of common stock under Regulation E.

During the year ended June 30,  2005 the  Company  issued  4,320,000  restricted
shares for  consulting  services  valued at  $215,000.  These shares were issued
prior to the Company becoming a Business Development Company.

During  the year  ended  June 30,  2005  Franchise  Capital  Corporation  issued
10,650,000 shares of restricted common stock for $412,950 cash.

During the year ended June 30, 2005 the Company converted its Series B Preferred
Stock into common stock. This conversion  resulted in the retiring of all Series
B Preferred  Stock and the issuance of  9,500,000  shares of  restricted  common
stock.

On December 17, 2004 the Board of  Directors  approved a new series of preferred
stock, Series C Preferred. The Series C Preferred Stock is, does not have voting
rights and is not entitled to receive  dividends.  Each share of Series C issued
can be converted into Common Stock on a 1:1 basis (a total of 13,500,000  shares
of  common  stock).  In the event of a  liquidation  event,  the  Series C stock
automatically  converts  into common stock based on the  foregoing  formula.  By
designation,  the Series C Preferred Stock is not affected by forward or reverse
splits  of the  Company's  common  stock or other  adjustment  to the  Company's
capital  structure.  The  Series C is  entitled  to name  three  members  of the
Company's  Board of Directors at all times.  During the year ended June 30 2005,
the Company had issued a total of 13,187,500 shares of Series C Preferred Stock.

Subsequent  to June 30,  2005,  the Company was notified by the  Securities  and
Exchange  Commission  ("Commission")  that the terms of the  Series C  Preferred
Stock issued by the Company may be in violation of Section 23 of the  Investment
Company Act of 1940. As a result,  the Series C holders agreed to a 1:10 reverse
split of the Series C stock  corresponding  to the similar 1:10 reverse split of
the  Company's  common  stock on January  14,  2005.  Further,  the  Company has
restructured the terms of the Series C Preferred Stock. Most significantly,  the
rights of the Series C Preferred Stock to convert to common stock and provisions
in  the  Series  C  Preferred  Stock  affording   protections   against  capital
reorganization were eliminated.

                                      F-20
<PAGE>
Capital  share  transactions  for the  years  ended  June 30,  2005 and 2004 are
schedule as follows:

<TABLE>
<CAPTION>
                                                                                               Convertible
                                                        Common Stock                         Preferred Stock
                                                   Shares           Amount             Shares             Amount
                                                   ------           ------             ------             ------
<S>                                             <C>             <C>                <C>                <C>
BALANCE, JUNE 30, 2002                           3,457,380       $        346       $         --       $        --
Net loss
                                               -----------       ------------       ------------       -----------
BALANCE, JUNE 30, 2003                           3,457,380                346                 --                --

Cancellation of shares previously issued        (1,666,000)              (167)
Shares issued for cash                              42,900                  4
Shares issued for services                         550,000                 55
Shares issued for business acquisition              85,000                  9
Preferred Class B issued for services                                                     10,000         3,800,000
Value of beneficial conversion feature
Shares issued for deferred compensation            200,000                 20
Amortization of deferred compensation
Shares issued for stock dividend                   795,960                 80
Net loss                                                                                                        --
                                               -----------       ------------       ------------       -----------
BALANCE, JUNE 30, 2004                           3,465,240                347             10,000         3,800,000

Shares issued for services                         432,000                 43
Amortization of deferred compensation                                      --
Fractional shares issued                                (2)                --                 --
Conversion of Preferred Class B to Common          950,000                 95            (10,000)       (3,800,000)
Preferred Class C issued for services                                      --         13,500,000             1,350
Record debt beneficial conversion feature                                  --
Shares sold for cash/partial debenture
 conversion                                     16,949,567              1,695
Shares sold for cash                            10,650,000              1,065
Shares issued on cashless exercise of
 warrants                                          168,000                 17
Conversion of Preferred Class C                    312,500                 31           (312,500)              (31)
Net loss
                                               -----------       ------------       ------------       -----------
BALANCE, JUNE 30, 2005                          32,927,305       $      3,293         13,187,500       $     1,319
                                               ===========       ============       ============       ===========

                                                                  Additional
                                                 Deferred          Paid in         Accumulated
                                               Compensation        Capital           Deficit           Total
                                               ------------        -------           -------           -----

BALANCE, JUNE 30, 2002                                           $    76,504       $   (37,174)    $    39,328
Net loss                                                                               (39,353)        (39,353)
                                               -----------       -----------       -----------     -----------
BALANCE, JUNE 30, 2003                                  --            76,504           (76,527)            (25)

Cancellation of shares previously issued                                 167                                --
Shares issued for cash                                                89,996                            90,000
Shares issued for services                                         1,059,687                         1,059,742
Shares issued for business acquisition                               239,991                           240,000
Preferred Class B issued for services                                                                3,800,000
Value of beneficial conversion feature                                21,212                            21,212
Shares issued for deferred compensation           (240,000)          239,800                                --
Amortization of deferred compensation               32,000                                              32,000
Shares issued for stock dividend                                         (80)                               --
Net loss                                                                            (5,405,130)     (5,405,130)
                                               -----------       -----------       -----------     -----------
BALANCE, JUNE 30, 2004                            (208,000)        1,727,457        (5,482,005)       (162,201)

Shares issued for services                                           214,955                           214,998
Amortization of deferred compensation              208,000                                             208,000
Fractional shares issued
Conversion of Preferred Class B to Common                          3,799,905                                --
Preferred Class C issued for services                                 79,650                            81,000
Record debt beneficial conversion feature                            339,879                           339,879
Shares sold for cash/partial debenture
 conversion                                                          305,755                           307,450
Shares sold for cash                                                 104,435                           105,500
Shares issued on cashless exercise of
 warrants                                                             25,183                            25,200
Conversion of Preferred Class C                                                                            --
Net loss                                                                              (772,517)       (772,517)
                                               -----------       -----------       -----------     -----------
BALANCE, JUNE 30, 2005                         $        --       $ 6,597,219       $(6,254,522)    $   347,309
                                               ===========       ===========       ===========     ===========
</TABLE>
                                      F-21
<PAGE>
10. COMMITMENTS

The Company entered into an arrangement  with Kokopelli to provide  Kokopelli up
to $1,200,000 under a line of credit.  Borrowings bear interest at 8% per annum.
At June 30,  2005,  the  Company  has  advanced  and has due  $8,000  under this
arrangement.

11. SUBSEQUENT EVENTS

Subsequent  to June 30, 2005 the Company  approved the sale of its Fit N Healthy
concept for $50,000,  its appraised  value at June 30, 2005. The buyer agreed to
assume a $50,000 note payable by the Company to a third party.

On September 27, 2005 the Company  approved the sale of Fathom Business  Systems
for  $44,000.  The  Company  took  title to  $44,000  in Fathom  trade  accounts
receivable  as  consideration  for the  sale  This  portfolio  company  has been
operating at a loss and its sale will improve the cash flow of the Company.

Subsequent to June 30, 2005, the Company entered into an agreement with Creative
Eateries  Corporation  ("Creative")  where the Company agreed to sell all of its
remaining portfolio companies to Creative for $200,000 cash and 3,583,667 shares
of  Creative's  common  stock.  The Company  has since  rescinded  the  Purchase
Agreement with Creative  because  Creative failed to meet its obligations  under
the Purchase Agreement.  Since the rescission occurred during the quarter ending
December 31, 2005,  financial  information  regarding the Purchase Agreement has
not, and will not, be a part of any of the Company's financial statements.

Subsequent to June 30, 2005, the Company was notified by a staff attorney at the
Securities and Exchange  Commission  ("Commission")  that the Series C Preferred
Stock issued by the Company may be in violation of Section 23 of the  Investment
Company  Act of 1940.  The  Company  is  currently  restructuring  the  Series C
Preferred Stock  designation into a format  acceptable with the Commission.  The
restructuring will alter several sections of the designation, most significantly
the sections  pertaining to the Preferred  Stock  conversion to common stock and
the  capital  reorganization  of common  stock via  forward  splits and  reverse
splits.

12. RELATED PARTY TRANSACTIONS

The Company's former officers, directors and majority shareholders made advances
to the Company in order for the Company to pay its operating expenses.  Advances
from  shareholders were $6,058 and $14,500 for the years ended June 30, 2004 and
June 30, 2003, respectively.  Repayments of advances were $0 and $12,170 for the
years  ended June 30,  2004 and June 30,  2003,  respectively.  In  addition,  a
shareholder  forgave the balance due to him of $2,330 during the year ended June
30, 2003.

In the year ended June 30, 2004,  the Company  entered  into various  agreements
with American Restaurant  Development Corp. ("ARDC"),  an entity controlled by a
significant shareholder of the Company. As of June 30, 2004 the shareholder held
a beneficial  interest in the Company totaling 11%. The Company  contracted with
ARDC to provide restaurant concepts for franchising. For each concept introduced
to the Company,  ARDC is to receive 500,000 shares of the Company's common stock
and $125,000,  $75,000 of which is paid  immediately  and the $50,000 balance as
cash is received by the Company for  franchise  fees  realized by the Company on
such  concepts.  In  addition,  ARDC  is to  receive  50% of all  non-refundable
payments   received  by  the  Company  for  new  franchise  and  area  developer
agreements.  Additionally,  ARDC will receive  royalties  equal 1% of the system
wide revenues of each  concept.  During the year ended June 30, 2004, a total of
2,000,000  shares  of the  Company's  common  stock  was  issued to ARDC and the
Company incurred $300,000 in fees for the four franchise concepts brought to the
Company by ARDC.

During the year ended June 30,  2004,  the  Company  entered  into an  operating
agreement with ALEXIS GROUP, LLC "ALEXIS" to operate a franchise company. ALEXIS
is owned by Jerry  Brown,  who was the  Company's  Chairman  of the Board at the
time.  Pauli's  Franchise  Company,  LLC was formed to provide an entity that is
equally controlled by ALEXIS and the Company.  ALEXIS will provide the exclusive
rights of the Pauli's  name,  trademarks,  menu,  and recipes.  The Company will
provide the funds for  start-up  and  operating  services.  At June 30, 2004 the
Chairman of the Board held a 25% interest in Pauli's Franchise Company, LLC, the
Company held a 72.5%  interest and an unrelated  party held the  remaining  2.5%
interest.

                                      F-22