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

FORM 10-QSB

x QUARTERLY
  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended **March 31, 2005**

 ̈ TRANSITION
  REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from __________________ to __________________

Commission File Number: **0 - 30927**

GARUDA CAPITAL CORP. 
  (Name of Small Business Issuer in its charter)

|Nevada                          | 980209053                 
|------------------------------- | --------------------------
|(state or other jurisdiction of | (I.R.S. Employer I.D. No.)
|incorporation or organization)  |                           

502 – 1978 Vine Street, Vancouver, British Columbia,
  Canada V6K 4S14 
  (Address of principal executive offices)

(604) 737-0203
  Issuer’s telephone number

_________________________________________________________________
  Former name, former address, and former fiscal year, if changed since last report

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Check whether the registrant filed all documents and reports
  required to be filed by Section 12, 13 or 15(d) 
  of the Exchange Act after the distribution of securities under a plan confirmed
  by a court. 
  YES ̈  NO ̈ N/A

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s
  classes of common equity, as of the latest 
  practicable date:

The total number of shares of the Issuer's common stock, $.001
  par value, outstanding at May 13, 2005 was 
  31,228,620.

Transitional Small Business Disclosure Format (Check one):
  YES ̈  NO x

1

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**TABLE OF CONTENTS**

|                                                                        | Page
|----------------------------------------------------------------------- | ----
|                                                                        |     
|PART I - FINANCIAL INFORMATION                                          | 2   
|                                                                        |     
|Special Note Regarding Forward Looking Information                      | 2   
|                                                                        |     
|Item 1 Financial Statements.                                            | 3   
|                                                                        |     
|Item 2. Management's Discussion and Analysis
      or Plan of Operation | 12  
|                                                                        |     
|Item 3. Controls and Procedures.                                        | 17  
|                                                                        |     
|Part II - OTHER INFORMATION                                             | 17  
|                                                                        |     
|Item 1. Legal Proceedings                                               | 17  
|                                                                        |     
|Item 2. Changes in Securities and Use of
      Proceeds                 | 18  
|                                                                        |     
|Item 3. Defaults Upon Senior Securities                                 | 18  
|                                                                        |     
|Item 4. Submission of Matters to a Vote
      of Securities Holders     | 18  
|                                                                        |     
|Item 5. Other Matters                                                   | 18  
|                                                                        |     
|Item 6. Exhibits                                                        | 18  
|                                                                        |     
|Signatures                                                              | 19  

PART I - FINANCIAL INFORMATION

Special Note Regarding Forward-Looking Statements

To the extent that the information presented in this Quarterly
  Report on Form 10-QSB for the quarter ended March 31, 2005 discusses financial
  projections, information or expectations about our products or markets, or otherwise
  makes statements about future events, such statements are forward-looking. We
  are making these forward-looking statements in reliance on the safe harbor provisions
  of the Private Securities Litigation Reform Act of 1995. Although we believe
  that the expectations reflected in these forward-looking statements are based
  on reasonable assumptions, there are a number of risks and uncertainties that
  could cause actual results to differ materially from such forward-looking statements.
  These risks and uncertainties are described, among other places in this Quarterly
  Report, in "Management's Discussion and Analysis or Plan of Operation."

In addition, we disclaim any obligations to update any forward-looking
  statements to reflect events or circumstances after the date of this Quarterly
  Report. When considering such forward-looking statements, you should keep in
  mind the risks referenced above and the other cautionary statements in this
  Quarterly Report.

2

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Item 1. Financial Statements.

CONSOLIDATED FINANCIAL STATEMENTS GARUDA CAPITAL CORP. VANCOUVER, BRITISH COLUMBIA, CANADA

|1. | CONSOLIDATED BALANCE SHEETS                                         
|-- | --------------------------------------------------------------------
|   |                                                                     
|2. | CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
      INCOME
|   |                                                                     
|3. | CONSOLIDATED STATEMENTS OF CASH FLOWS                               
|   |                                                                     
|4. | CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                

3

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|GARUDA
      CAPITAL CORP.CONSOLIDATED BALANCE SHEETS
|-----------------------------------------------------

|                                                          |   | March 31,   |   |   | June 30,   |  
|--------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|                                                          |   | 2005        |   |   | 2004       |  
|                                                          |   | (unaudited) |   |   |            |  
|ASSETS                                                    |   |             |   |   |            |  
|CURRENT ASSETS                                            |   |             |   |   |            |  
|Accounts receivable                                       | $ | 54,222      |   | $ | 126,970    |  
|Marketable securities                                     |   | 342,039     |   |   | -          |  
|Inventory                                                 |   | 318,258     |   |   | 272,191    |  
|Prepaid expenses                                          |   | 269,257     |   |   | 15,346     |  
|TOTAL
      CURRENT ASSETS                                |   | 983,776     |   |   | 414,507    |  
|                                                          |   |             |   |   |            |  
|PROPERTY AND EQUIPMENT, NET                               |   | 315,194     |   |   | 345,150    |  
|                                                          |   |             |   |   |            |  
|OTHER ASSETS                                              |   |             |   |   |            |  
|Patents and trademarks,
      net of amortization         |   | 18,950      |   |   | 13,671     |  
|TOTAL
      OTHER ASSETS                                  |   | 18,950      |   |   | 13,671     |  
|                                                          |   |             |   |   |            |  
|TOTAL ASSETS                                              | $ | 1,317,920   |   | $ | 773,328    |  
|                                                          |   |             |   |   |            |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)            |   |             |   |   |            |  
|                                                          |   |             |   |   |            |  
|CURRENT LIABILITIES                                       |   |             |   |   |            |  
|Bank indebtedness                                         | $ | 113,967     |   | $ | 206,653    |  
|Accounts payable and
      accrued expenses               |   | 432,626     |   |   | 413,316    |  
|Notes payable - current
      portion                     |   | 20,407      |   |   | 172,717    |  
|Capital lease obligation
      - current portion          |   | 3,055       |   |   | 2,287      |  
|TOTAL
      CURRENT LIABILITIES                           |   | 570,055     |   |   | 794,973    |  
|                                                          |   |             |   |   |            |  
|LONG TERM LIABILITIES                                     |   |             |   |   |            |  
|Notes payable - related
      party                       |   | 310,605     |   |   | 832,133    |  
|Notes payable                                             |   | 187,298     |   |   | 12,212     |  
|Notes payable - convertible                               |   | 113,345     |   |   | 100,000    |  
|Capital lease obligation                                  |   | -           |   |   | 2,758      |  
|TOTAL
      LONG TERM LIABILITIES                         |   | 611,248     |   |   | 947,103    |  
|                                                          |   |             |   |   |            |  
|COMMITMENTS AND CONTINGENCIES                             |   | -           |   |   | -          |  
|                                                          |   |             |   |   |            |  
|STOCKHOLDERS' EQUITY (DEFICIT)                            |   |             |   |   |            |  
|Preferred stock, $0.01
      par value; 10,000,000 shares |   |             |   |   |            |  
|authorized,
      none issued and outstanding             |   | -           |   |   | -          |  
|Common stock, $0.001
      par value; 50,000,000 shares   |   |             |   |   |            |  
|authorized,
      27,428,619 and 6,373,575 shares         |   |             |   |   |            |  
|issued
      and outstanding, respectively                |   | 27,429      |   |   | 6,374      |  
|Additional paid-in
      capital                          |   | 4,404,764   |   |   | 2,444,715  |  
|Accumulated deficit                                       |   | (4,277,464  | ) |   | (3,416,446 | )
|Other comprehensive
      loss                            |   | (18,112     | ) |   | (3,391     | )
|TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                      |   | 136,617     |   |   | (968,748   | )
|                                                          |   |             |   |   |            |  
|TOTAL LIABILITIES AND                                     |   |             |   |   |            |  
|STOCKHOLDERS' EQUITY (DEFICIT)                            | $ | 1,317,920   |   | $ | 773,328    |  

See Condensed Notes to Consolidated Financial Statements

4

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|GARUDA
      CAPITAL CORP.CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE
      INCOME (LOSS)
|----------------------------------------------------------------------------------------------------

|                                            |   | Three months ended |   |   | Nine months ended |  
|------------------------------------------- | - | ------------------ | - | - | ----------------- | -
|                                            |   | March 31,          |   |   | March 31,         |  
|                                            |   | 2005               |   |   | 2004              |  
|                                            |   | (unaudited)        |   |   | (unaudited)       |  
|                                            |   |                    |   |   |                   |  
|                                            |   |                    |   |   |                   |  
|REVENUES                                    | $ | 134,275            |   | $ | 267,978           |  
|                                            |   |                    |   |   |                   |  
|COST OF SALES                               |   | 108,592            |   |   | 219,038           |  
|                                            |   |                    |   |   |                   |  
|GROSS PROFIT                                |   | 25,683             |   |   | 48,940            |  
|                                            |   |                    |   |   |                   |  
|OPERATING EXPENSES                          |   |                    |   |   |                   |  
|General and administrative                  |   | 237,630            |   |   | 162,019           |  
|Depreciation                                |   | 15,542             |   |   | 13,973            |  
|Advertising and promotion                   |   | 7,592              |   |   | -                 |  
|Equipment and premises leases               |   | 41,508             |   |   | 36,766            |  
|Total
      Operating Expenses              |   | 302,272            |   |   | 212,758           |  
|                                            |   |                    |   |   |                   |  
|LOSS FROM OPERATIONS                        |   | (276,589           | ) |   | (163,818          | )
|                                            |   |                    |   |   |                   |  
|OTHER INCOME (EXPENSE)                      |   |                    |   |   |                   |  
|Gain on agency transaction                  |   | -                  |   |   | -                 |  
|Gain (loss) on marketable securities        |   | -                  |   |   | -                 |  
|Interest expenses                           |   | (179,027           | ) |   | (6,311            | )
|Total
      Other Income (Expense)          |   | (179,027           | ) |   | (6,311            | )
|                                            |   |                    |   |   |                   |  
|LOSS BEFORE TAXES                           |   | (455,616           | ) |   | (170,129          | )
|                                            |   |                    |   |   |                   |  
|INCOME TAXES                                |   | -                  |   |   | -                 |  
|                                            |   |                    |   |   |                   |  
|NET LOSS                                    |   | (455,616           | ) |   | (170,129          | )
|                                            |   |                    |   |   |                   |  
|OTHER COMPREHENSIVE INCOME                  |   |                    |   |   |                   |  
|Gain (loss) on foreign currency translation |   | (45,080            | ) |   | 2,821             |  
|Total
      Other Comprehensive Income      |   | (45,080            | ) |   | 2,821             |  
|                                            |   |                    |   |   |                   |  
|COMPREHENSIVE NET LOSS                      | $ | (500,696           | ) | $ | (167,308          | )
|                                            |   |                    |   |   |                   |  
|NET LOSS PER COMMON SHARE,                  |   |                    |   |   |                   |  
|BASIC AND DILUTED                           | $ | (0.04              | ) | $ | (0.03             | )
|                                            |   |                    |   |   |                   |  
|WEIGHTED AVERAGE NUMBER                     |   |                    |   |   |                   |  
|OF COMMON SHARES OUTSTANDING,               |   |                    |   |   |                   |  
|BASIC AND DILUTED                           |   | 11,178,582         |   |   | 6,308,698         |  

See Condensed Notes to Consolidated Financial Statements

5

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|GARUDA
      CAPITAL CORP.CONSOLIDATED STATEMENT OF CASH FLOWS
|--------------------------------------------------------------

|                                                              |   | Nine months ended |  
|------------------------------------------------------------- | - | ----------------- | -
|                                                              |   | March 31,         |  
|                                                              |   | 2005              |  
|                                                              |   | (unaudited)       |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                         |   |                   |  
|Net loss                                                      | $ | (861,018          | )
|Adjustments to reconcile net loss to net
      cash           |   |                   |  
|provided (used) by
      operating activities:                |   |                   |  
|Depreciation
      and amortization                           |   | 37,390            |  
|Common
      stock issued for services                        |   | 329,100           |  
|Common
      stock and warrants issued for interest           |   | 166,359           |  
|Loss
      on sale of marketable securities                   |   | -                 |  
|Gain
      from agency transaction                            |   | (30,665           | )
|Changes in operating assets and liabilities:                  |   |                   |  
|Decrease
      (increase) in accounts receivable              |   | 72,748            |  
|Increase
      in prepaid expenses                            |   | (253,911          | )
|Increase
      in accounts payable and accrued expenses       |   | 19,310            |  
|Increase
      in inventory                                   |   | (46,067           | )
|Decrease
      in bank indebtedness                           |   | (92,686           | )
|Net cash used in operating activities                         |   | (566,754          | )
|                                                              |   |                   |  
|CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:                  |   |                   |  
|Purchase of equipment and intangibles                         |   | (12,713           | )
|Purchase of investments                                       |   | (510,694          | )
|Proceeds from sale of investments                             |   | 199,320           |  
|Net cash provided (used) by investing activities              |   | (324,087          | )
|                                                              |   |                   |  
|CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:                  |   |                   |  
|Decrease in bank indebtedness                                 |   | (92,686           | )
|Payments from loans                                           |   | (22,775           | )
|Payments of lease obligations                                 |   | (2,334            | )
|Additions to loans                                            |   | -                 |  
|Common stock issued for cash                                  |   | 675,000           |  
|Proceeds from shareholder loans                               |   | 308,622           |  
|Net cash provided by financing activities                     |   | 865,827           |  
|                                                              |   |                   |  
|Net decrease in cash and cash equivalents                     |   | (25,014           | )
|                                                              |   |                   |  
|Other comprehensive gain - foreign currency
      translation |   | 25,014            |  
|                                                              |   |                   |  
|Cash, beginning of period                                     |   | -                 |  
|                                                              |   |                   |  
|Cash, end of period                                           | $ | -                 |  
|                                                              |   |                   |  
|SUPPLEMENTAL CASH FLOW DISCLOSURES:                           |   |                   |  
|Income taxes paid                                             | $ | -                 |  
|Interest paid                                                 | $ | -                 |  
|                                                              |   |                   |  
|NON-CASH FINANCING AND INVESTING ACTIVITIES:                  |   |                   |  
|Common stock issued for services                              | $ | 329,100           |  
|Common stock and warrants issued for debt                     | $ | 810,665           |  
|Common stock and warrants issued for interest                 | $ | 166,339           |  

See Condensed Notes to Consolidated Financial Statements

6

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GARUDA CAPITAL CORP.CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
  March 31, 2005

NOTE 1 – BASIS OF PRESENTATION

The foregoing unaudited interim financial statements have
  been prepared in accordance with generally accepted accounting principles for
  interim financial information and with the instructions to Form 10-QSB and Regulation
  S-B as promulgated by the Securities and Exchange Commission. Accordingly, these
  financial statements do not include all of the disclosures required by generally
  accepted accounting principles for complete financial statements. These unaudited
  interim financial statements should be read in conjunction with the Company’s
  audited financial statements for the year ended June 30, 2004. In the opinion
  of management, the unaudited interim financial statements furnished herein include
  all adjustments, all of which are of a normal recurring nature, necessary for
  a fair statement of the results for the interim period presented.

The preparation of financial statements in accordance with
  generally accepted accounting principles requires the use of estimates and assumptions
  that affect the reported amounts of assets and liabilities, disclosure of contingent
  assets and liabilities known to exist as of the date the financial statements
  are published, and the reported amounts of revenues and expenses during the
  reporting period. Uncertainties with respect to such estimates and assumptions
  are inherent in the preparation of the Company's financial statements; accordingly,
  it is possible that the actual results could differ from these estimates and
  assumptions that could have a material effect on the reported amounts of the
  Company's financial position and results of operations.

Certain amounts from prior periods have been reclassified
  to conform to the current period presentation. This reclassification has resulted
  in no changes to the Company’s accumulated deficit or net losses presented.

Operating results for the nine-month period ended March 31,
  2005 are not necessarily indicative of the results that may be expected for
  the year ending June 30, 2005.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

New Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board
  issued Statement of Financial Accounting Standards No. 151, “Inventory
  Costs— an amendment of ARB No. 43, Chapter 4” (hereinafter “SFAS
  No. 151”). This statement amends the guidance in ARB No. 43, Chapter 4,
  “Inventory Pricing,” by clarifying that abnormal amounts of idle
  facility expense, freight, handling costs, and wasted material (spoilage) should
  be recognized as current-period charges and by requiring the allocation of fixed
  production overheads to inventory based on the normal capacity of the production
  facilities. This statement is effective for inventory costs incurred during
  fiscal years beginning after June 15, 2005. Management believes the adoption
  of this Statement will have no impact on the Company’s financial condition
  or results of operations.

In December 2004, the Financial Accounting Standards Board
  issued Statement of Financial Accounting Standards No. 152, “Accounting
  for Real Estate Time-Sharing Transactions – an amendment of FASB Statements
  No. 66 and 67” (hereinafter “SFAS No. 152”), which amends
  FASB statement No. 66, “Accounting for Sales of Real Estate”, to
  reference the financial accounting and reporting guidance for real estate time-sharing
  transactions that is provided in AICPA Statement of Position 04-2, “Accounting
  for Real Estate Time-Sharing Transactions” (hereinafter “SOP 04-2”).
  This statement also amends FASB Statement No. 67, “Accounting for Costs
  and Initial Rental Operations of Real Estate Projects”, to state that
  the guidance for (a) incidental operations and (b) costs incurred to sell real
  estate projects does not apply to real estate time-sharing transactions. The
  accounting for those operations and costs is subject to the guidance in SOP
  04-2. This Statement is effective for financial statements for fiscal years
  beginning after June 15, 2005. Management believes the adoption of this Statement
  will have no impact on the Company’s financial condition or results of
  operations.

7

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In December 2004, the Financial Accounting Standards Board
  issued Statement of Financial Accounting Standards No.153, “Exchanges
  of Nonmonetary Assets – an Amendment of APB Opinion No. 29”, (hereinafter
  “SFAS No. 153”). This statement eliminates the exception to fair
  value for exchanges of similar productive assets and replaces it with a general
  exception for exchange transactions that do not have commercial substance, defined
  as transactions that are not expected to result in significant changes in the
  cash flows of the reporting entity. This statement is effective for financial
  statements for fiscal years beginning after June 15, 2005. Management believes
  the adoption of this Statement will have no impact on the Company’s financial
  condition or results of operations.

In December 2004, the Financial Accounting Standards Board
  issued a revision to Statement of Financial Accounting Standards No. 123 (revised
  2004), “Share-Based Payments” (hereinafter “SFAS No. 123 (R)”).
  This Statement replaces FASB Statement No. 123, “Accounting for Stock-Based
  Compensation”, and supersedes APB Opinion No. 25, “Accounting for
  Stock Issued to Employees”. SFAS No. 123 (R) establishes standards for
  the accounting for share-based payment transactions in which an entity exchanges
  its equity instruments for goods or services. It also addresses transactions
  in which an entity incurs liabilities in exchange for goods or services that
  are based on the fair value of the entity’s equity instruments or that
  may be settled by the issuance of those equity instruments. This statement covers
  a wide range of share-based compensation arrangements including share options,
  restricted share plans, performance-based award, share appreciation rights and
  employee share purchase plans. SFAS No. 123 (R) requires a public entity to
  measure the cost of employee services received in exchange for an award of equity
  instruments based on the fair value of the award on the grand date (with limited
  exceptions). That cost will be recognized in the entity’s financial statements
  over the period during which the employee is required to provide services in
  exchange for the award. Management has not currently evaluated the impact of
  adoption on its overall results of operations or financial position.

NOTE 3 – GOING CONCERN UNCERTAINTY

The accompanying financial statements have been prepared on
  a going concern basis, which contemplates the realization of assets and satisfaction
  of liabilities in the normal course of business. The Company has incurred material
  recurring losses from operations. At March 31, 2005, the Company had an accumulated
  deficit of $4,277,464 and limited cash resources. For the nine months ended
  March 31, 2005, the Company sustained a net loss of $861,018. These factors,
  among others, indicate that the Company may be unable to continue as a going
  concern for a reasonable period of time. The financial statements do not include
  any adjustments relating to the recoverability and classification of recorded
  asset amounts or the amounts and classification of liabilities that may be necessary
  should the Company be unable to continue as a going concern. The Company’s
  continuation as a going concern is contingent upon its ability to obtain additional
  financing, and to generate revenue and cash flow to meet its obligations on
  a timely basis. The Company’s management is currently putting sales strategies
  in place which will, if successful, mitigate these factors which raise substantial
  doubt about the Company’s ability to continue as a going concern.

NOTE 4 – EQUITY TRANSACTIONS

On March 4, 2005, the Company’s board of directors approved
  the 2005 Non-Qualified Stock Compensation Plan, to issue up to 3,000,000 shares
  of the Company’s common stock to employees, executives and consultants.
  During the three months ended March 31, 2005, the Company issued 2,980,000 shares
  of common stock to consultants for services. These shares were valued at the
  fair market value on the date of grant of $0.10 per share. Total consulting
  services of $298,000 was booked in operating expenses.

In March 2005, the Company issued 9,770,044 “units”
  for a fair market value of $0.10 per unit. Each unit consists of one share
  of common stock and one half warrant, with each warrant to purchase one share
  of common stock at an exercise price of $0.20 per share. The warrants are
  exercisable for a period of two years. The value of the warrants was estimated
  on the grant date using the Black-Scholes Option Price Calculation. The following
  assumptions were made in estimating fair value: risk-free interest rate is 4%,
  volatility is 98.21%, and expected life is 2 years. The fair market value of
  the warrants attached was $122,125 and is included in additional paid in
  capital. The units were issued for conversion of $977,004 of the Company’s
  outstanding debt.

In March 2005, the Company also issued 6,750,000 of the aforementioned
  units for cash of $675,000. The fair market value of the warrants attached
  was $84,375 and is included in additional paid in capital.

8

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In December 2005, the Company issued 1,555,000 shares of common
  stock to consultants and employees as consideration for services. The shares
  were valued at the fair market value of $0.02 per share and $31,100
  is included in operating expenses.

NOTE 5 – RELATED PARTY TRANSACTIONS

The Company is indebted to certain shareholders as follows:

|                                                            |   | March 31, |  |   | June 30,
|----------------------------------------------------------- | - | --------- |  | - | --------
|                                                            |   | 2005      |  |   | 2004    
|Shareholder notes bearing interest at 10%,                  |   |           |  |   |         
|due September 1, 2003, secured
      by all                 |   |           |  |   |         
|personal property of certain subsidiaries,
      delinquent | $ | -         |  | $ | 50,000  
|Shareholder note bearing interest at 10%,                   |   |           |  |   |         
|due November 1, 2003, secured by
      all                  |   |           |  |   |         
|personal property of certain subsidiaries,
      delinquent |   | 50,000    |  |   | 60,000  
|Shareholder note bearing interest at 10%,                   |   |           |  |   |         
|unspecified due date, unsecured                             |   | 203,534   |  |   | 203,534 
|Shareholder note non-interest bearing                       |   |           |  |   |         
|due June 30, 2006                                           |   | -         |  |   | 100,000 
|                                                            |   | 253,534   |  |   | 413,534 
|Advances from shareholders, unsecured, non-interest         |   |           |  |   |         
|bearing with no specific due dates                          |   | 57,071    |  |   | 418,599 
|                                                            | $ | 310,605   |  | $ | 832,133 

NOTE 6 – INVENTORY

Inventories are stated at the lower of average cost or market.
  The cost of finished goods includes the cost of raw material, direct and indirect
  labor, and other indirect manufacturing costs. The Company has recorded an allowance
  of $25,000 for inventory obsolescence.

The components of inventory at March 31, 2005 and June 30,
  2004 are as follows:

|                   |   | March 31, 2005 |  |   | June 30, 2004
|------------------ | - | -------------- |  | - | -------------
|Packaging supplies | $ | 85,128         |  | $ | 173,251      
|Finished goods     |   | 186,065        |  |   | 57,291       
|Raw materials      |   | 46,514         |  |   | 36,547       
|Other goods        |   | 551            |  |   | 5,102        
|                   | $ | 318,258        |  | $ | 272,191      

NOTE 7 – INVESTMENTS

Pursuant to Statement of Financial Accounting Standards (SFAS)
  No. 115, the Company’s investments in securities are classified as either
  trading, held to maturity, or available-for-sale. During the nine months ended
  March 31, 2005, the Company did not own any securities classified as either
  trading or held to maturity. However, at March 31, 2005, the Company did own
  securities classified as available-for-sale.

The Company’s securities investments are classified as
  available for sale securities which are recorded at fair value in investments
  on the balance sheet, with the change in fair value during the period excluded
  from earnings and recorded net of tax as a component of other comprehensive
  income.

At March 31, 2005, the market values of investments were as
  follows:

|            |                     |   | March 31, 2005 |  
|----------- | ------------------- | - | -------------- | -
|Investments |                     |   |               
|            | Common Stock        | $ | 342,034        |  
|            | Cost                |   | 349,539        |  
|            | Market Value Change | $ | (7,500         | )

NOTE 8 – BANK INDEBTEDNESS AND BANK LOANS

Demand Loan 
  The Company has a demand loan from a bank in the amount of $200,000, which
  is personally guaranteed by a shareholder of the Company. Outstanding advances
  bear interest at the bank’s base rate plus 2%, payable on demand by the
  bank. The loan is secured by all present and future personal property acquired
  by Hagensborg Foods Ltd.

Overdraft 
  Hagensborg Foods Ltd has a bank overdraft facility in the amount of $100,000.
  Outstanding advances bear interest at the bank’s base rate plus 2%. At
  March 31, 2005 and June 30, 2004, the Company had a net outstanding balance
  of $113,967 and $206,653, respectively, on this overdraft facility.
  The facility is personally guaranteed by a shareholder of the Company and secured
  by all present and future personal property acquired by Hagensborg Foods Ltd.

9

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NOTE 9 – SEGMENT INFORMATION

The Company has adopted Statement of Financial Accounting
  Standards No. 131, "Disclosures about Segments of an Enterprise and Related
  Information," (hereinafter “SFAS No. 131”). SFAS No. 131 established
  standards for reporting information aboutoperating segments in annual financial
  statements and requires selected information about operating segments in interim
  financial reports issued to stockholders. It also established standards for
  related disclosures about products and services and geographic areas. Operating
  segments are defined as components of an enterprise about which separate financial
  information is available, evaluated regularly by the chief operating decision
  makers, or a decision making group, in deciding how to allocate resources and
  in assessing performance.

The following table reflects certain information for the Company’s
  segments:

|                   |   | Three Months Ended March 31, 2005 |  
|------------------ | - | --------------------------------- | -
|                   |   |                                   |  
|                   |   |                                   |  
|                   |   | Hagensborg                        |  
|                   |   | Foods Ltd.                        |  
|                   |   |                                   |  
|Gross profit       | $ | 23,307                            |  
|Other income(loss) | $ | (12,671                           | )
|Net income (loss)  | $ | (207,838                          | )
|Segment assets     | $ | 655,460                           |  
|                   |   |                                   |  
|                   |   | Year Ended June 30, 2004          |  
|                   |   |                                   |  
|Gross profit       | $ | 112,616                           |  
|Other income(loss) | $ | -                                 |  
|Net income (loss)  | $ | (464,845                          | )
|Segment assets     | $ | 1,088,622                         |  

NOTE 10 – GAIN FROM AGENCY TRANSACTION

During the nine months ended March 31, 2005, the Company was
  paid a fee of $30,665 from an agency transaction. This is recorded in the
  accompanying financial statements as other income.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Pursuant to the Company’s bank loan agreement (more
  fully discussed in Note 5), the Company’s ratio of current assets to current
  liabilities cannot exceed 1.2 to 1.0. At September 30, 2004 and June 30, 2004,
  the Company was in violation of this condition. As of the date of this report,
  the bank has not taken an action related to this violation.

Litigation 
  On May 26, 2004, a lawsuit was filed in Ontario Superior Court against the Company
  alleging trademark infringement associated with Kraft’s Toblerone chocolate
  bar. This lawsuit was resolved on February 28, 2005 and the Company has no further
  liability pursuant to the settlement.

10

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NOTE 12 – SUBSEQUENT EVENTS

On April 26, 2005, the Company’s board of directors
  approved the April 2005 Non-Qualified Stock Compensation Plan, to issue up to
  4,000,000 shares of the Company’s common stock to employees, executives
  and consultants. On May 13, 2005, the Company issued 3,000,000 shares of common
  stock to consultants pursuant to five consulting agreements entered into between
  May 2 and May 6, 2005. The shares were valued at the fair market value on the
  date of grant at $0.12 per share.

On April 13, 2005, the Company issued 800,000 shares of common
  stock valued at $0.10 per share to three directors for services rendered
  to the Company. The stock was valued at the fair market value on the date of
  issuance.

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Item 2. Management’s Discussion and Analysis or Plan
  of Operation

Overview

Our original goal from inception in July 1997 was to develop
  a film production business. These efforts were abandoned in September 2001.
  On September 7, 2001 all existing officers and directors resigned and new officers
  and directors were appointed to evaluate new business opportunities.

By two agreements dated April 1, 2002, we acquired Hagensborg
  Foods Ltd. (“Hagensborg”), a Vancouver-based manufacturer
  and marketer of fine chocolates and other gourmet foods and Natural Program
  Inc. (“Natural Program”), a manufacturer and distributor
  of natural medicine.

Since November, 2004, Hagensborg has been developing a new
  line of chocolate products, including new names, shapes and packaging for our
  chocolate bars and truffles. Hagensborg intends to launch its new line of chocolate
  products in the summer of 2005.

We have incorporated three subsidiaries, Garuda Ventures Canada
  Inc., Garuda Gold Corporation, both incorporated under the laws of British Columbia,
  Canada, and Garuda Minerals Inc., incorporated in Nevada. Garuda Ventures Canada
  Inc. holds idle working capital to be invested in marketable securities and
  has no other assets. Garuda Gold Corporation is currently inactive and has no
  assets, but will be activated as soon as a suitable project has been identified.
  We intend to develop mining activities through Garuda Minerals Inc.

Results of Operations for the nine months ended March 31,
  2005 compared to nine months ended March 31, 2004 – Garuda Capital Corp.
  on a Consolidated Basis

During the nine months ended March 31, 2005, we realized total
  revenues of $ 637,177, compared to $1,086,711in revenues for the nine
  months ended March 31, 2004. Our costs of sales for the nine months ended March
  31, 2005 was $530,469, giving us a gross profit of $106,708. Our costs
  of sales in the nine months ended March 31, 2004 was 899,741, and our gross
  profit for the period was $186,970. We incurred a net loss for the nine
  months ended March 31, 2005 of $861,018, compared to a net loss of $575,118
  for the same period in 2003. The decrease in revenues and resultant increase
  in net loss for 2005 was as a result of the phasing out of our previous chocolate
  products, and the concentration of management’s efforts in designing Hagensborg’s
  new line of chocolates. Hagensborg began the redesign of all of its chocolate
  products in November, 2004, after several quarters of dissppointing sales. Prior
  to launching the new lines of chocolate products in the summer of 2005, Hagensborg
  intends to conduct market research and develop comprehensive marketing plans
  for the launch of the new products.

Our general and administrative costs for the nine months ended
  March 31, 2005 were $567,031 compared to $568,186 for the nine months
  ended March 31, 2004, which in both periods consisted primarily of personnel
  costs, professional and legal costs, consulting fees, and general office costs.

Advertising and promotion costs for the nine months ended
  March 31, 2005 were $59,208, a $59,208 increase from the same period
  in 2004. Depreciation expenses decreased from $41,078 for the nine months
  ended March 31, 2004 to $37,390 for the nine months ended March 31, 2005.

Our equipment leases for both Hagensborg and Natural Program
  were $132,979 and $109,355 for the nine months ended March 31, 2005
  and March 31, 2004, respectively.

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We anticipate that we will incur increased sales and marketing
  costs, including hiring sales personnel, broker fees and tradeshow attendance
  fees, as we implement our business growth strategies for both Hagensborg and
  Natural Program.

Results of Operations for the Three months ended March
  31, 2005 Compared to Three months ended March 31, 2004 – Garuda Capital
  Corp. on a Consolidated Basis

During the three months ended March 31, 2005, we realized
  total revenues of $134,275, compared to $267,978 in revenues for the
  three months ended March 31, 2004 and we incurred a net loss for the three months
  ended March 31, 2005 of $276,589, compared to a net loss of $(170,129)
  for the same period in 2003. The decrease in revenues and resultant increase
  in net loss for 2005 during the three months ended March 31, 2005 was as a result
  of decreased sales for our Hagensborg operations, which was due to the phasing
  out of Hagensborg’s previous line of chocolates and the focus of management’s
  time on the redesign of the Hagensborg’s new line of chocolates.

Gross profit for the three months ended March 31, 2005 was
  $25,683 compared to $48,940 for the same period in 2004.

Our general and administrative costs for the three months
  ended March 31, 2005 were $237,630, compared to $162,019 for the three
  months ended March 31, 2004, which consisted primarily of personnel costs, professional
  and legal costs, consulting fees, and general office costs. The increase in
  general and administrative costs between the two periods is largely the result
  of our increased corporate activities, including raising capital, in the most
  recent period.

Advertising and promotion costs for the three months ended
  March 31, 2005 were $7,592, a $7,592 increase from the same period in
  2003. Depreciation expenses increased from $13,973 for the three months
  ended March 31, 2004 to $15,542 for the three months ended March 31, 2005.

Our equipment leases for both Hagensborg and Natural Program
  were $41,508 and $36,766 for the three months ended March 31, 2005 and
  March 31, 2004, respectively.

We anticipate that we will incur increased sales and marketing
  costs, including hiring sales personnel, broker fees and tradeshow attendance
  fees, as we implement our business growth strategies for both Hagensborg and
  Natural Program.

Liquidity and Capital Resources for March 31, 2005 Compared
  to June 30, 2004 on Consolidated Basis

We believe that sales from our subsidiaries will not provide
  sufficient capital resources to sustain operations and fund product development
  throughout our fiscal year ended June 30, 2005. We expect to raise capital through
  equity sales as necessary to fund future growth until we operate above the break-even
  point. We continually evaluate opportunities to sell additional equity or debt
  securities, or obtain credit facilities from lenders to strengthen our financial
  position. The sale of additional equity or convertible debt securities could
  result in additional dilution to our stockholders.

Since April 1, 2002, when we acquired Hagensborg, we have
  financed Hagensborg’s operations partly through revenues from operations
  and bank credit facilities, and partly through the issuance of equity shares
  and convertible debentures. Hagensborg has not been able to reach the break-even
  point for the last four fiscal years and has had to rely on Garuda for capital
  resources. We believe that sales from

13

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Hagensborg’s new product lines will add new capital
  resources, but may not be sufficient to sustain operations and fund new product
  launches throughout the fiscal year ended June 30, 2005.

Since April 1, 2003, when Natural Program was acquired by
  the Company, we have financed Natural Program’s operations partly through
  revenues and bank credit facilities, and partly through the issuance of equity
  shares. Natural Program has not yet able to reach the break-even point and has
  had to rely on the Company for capital resources. We believe that additional
  sales resulting from Natural Program’s increased marketing efforts will
  add new capital resources, but may not be sufficient to sustain operations and
  fund new product launches throughout the fiscal year ended June 30, 2005.

As of March 31, 2005, we had current assets of $983,776,
  an increase of $569,269 from June 30, 2004, primarily as a result of an
  increase in prepaid expenses and inventory.

Non-current assets as of March 31, 2005 were $18,950,
  net of depreciation, compared to non-current assets of $13,671 as of June
  30, 2004. Our total assets as of March 31, 2005 was $1,317,920. This is
  an increase form March 31, 2004, when the Company had total assets of $773,328.

Total liabilities increased from $1,742,076 as of June
  30, 2004 to $1,181,303 as of March 31, 2005. This is mainly due to the conversion
  of debt into equity. The current liabilities as of March 31, 2005 were $570,055
  including the current portion of notes payable in the sum of $20,407. This
  compares to current liabilities of $794,973 and notes payable of $172,717as
  of June 30, 2004.

Company Risk Factors

We will need additional capital and this may result
  in dilution of existing shareholders

In order to carry out our business plans it is likely that
  we will need additional capital. It is also likely that we will raise additional
  capital by issuing additional equity securities. As a result, current shareholders
  are likely to experience dilution. If adequate funds are not available, or are
  not available on acceptable terms, we may not be able to carry out our business
  plans. This could result in our not being profitable and remaining in business.

The price and trading volume of our common stock has
  been highly volatile and could adversely affect an investor’s ability
  to sell the shares and theavailable price for the shares
  when sold.

The price and trading volume of our common stock has been
  highly volatile. The price range since September 2002 has been from $0.06
  per share to $0.71 per share. In addition, the daily trading volume has
  varied from no shares to 1,200,000 shares. Investors need to consider this volatility,
  which could result in lower prices being available to the investor if the investor
  desires to sell their shares at a given time.

Our common stock may be classified as a “penny
  stock” which could adversely affect an investor’s ability to sell
  the shares and the available price for the shares when sold.

We believe that our common stock would be characterized as
  “penny stock” under U.S. Securities and Exchange Commission
  regulations. As such, broker-dealers dealing in our common stock will be subject
  to the disclosure rules for transactions involving penny stocks, which require
  the broker-dealer to determine if purchasing our common stock is suitable for
  a particular investor. The broker-dealer must also obtain the written consent
  of purchasers to purchase our common stock. The broker-dealer must also disclose
  the best bid and offer prices available for our stock and the price at which
  the broker-dealer last purchased or sold our common stock. These additional
  burdens imposed upon broker-dealers may discourage them from effecting transactions
  in our common stock, which could make it difficult for an investor to sell their
  shares.

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We are dependent on our key personnel and may not be
  able to easily replace such personnel.

Our success depends, to a significant extent, upon the efforts
  and abilities of a small number of key management personnel and the loss of
  the services of one or more of these individuals could adversely affect our
  businesses. The particular areas of expertise we are dependent upon include
  overall business planning and finance, the manufacture and marketing of gourmet
  chocolates and foods and Chinese herbal medicine. Our success is also dependent
  upon our ability to attract and retain qualified employees and personnel. Competition
  for such personnel is intense and we may not be able to attract and retain the
  personnel necessary for the development and operations of our businesses. Our
  competition for qualified personnel may be hindered by our lack of capital or
  fringe benefits which larger, more established competitors can provide. We have
  no “key man” life insurance with respect to any of its key
  management personnel.

We use Canadian currency and changes in exchange rates
  could adversely affect our sales and operations.

Much of our sales and supplies of raw materials are denominated
  in foreign currencies, usually the Canadian dollar. Changes in exchange rates,
  i.e., between US and Canadian dollar as well as other currencies could result
  in circumstances where our supplies and our products suddenly become more expensive
  to us or to consumers which would adversely affect our costs, our sales and
  our results of operations. Due to the recent fluctuations between the Canadian
  and US prices, our revenues from US customers have been affected proportionately;
  that is, while our cost of goods purchased in Canadian and our revenues from
  US sales have remained static, once the US funds are converted into Canadian
  dollars, the revenues have decreased due to the decreased value of the US dollar.

The number of shares issuable upon exercise of outstanding
  common stock purchase warrants and convertible debenture may adversely affect
  the market price for our shares.

Common stock purchase warrants to acquire up to 7,855,979
  shares of common stock at a price of $0.20 per share on or before March
  15, 2007 and warrants to acquire up to 100,000 shares of common stock at a price
  of $0.20 on or before March 24, 2007 are outstanding as of May 13, 2005.
  There is an outstanding convertible debenture allowing for the conversion of
  $100,000 in debt to 1,000,000 units consisting each of one common share
  and one half warrant, with each warrant allowing the purchase of one common
  share at a price of $0.20 by June 30, 2006. The exercise of common stock
  purchase warrants and conversion of debt and the sale of underlying shares could
  have an adverse effect on the market for the shares.

We do not anticipate paying dividends to shareholders in
  the foreseeable future.

We have not paid dividends on our common shares and intend,
  for the foreseeable future, to invest any earnings in the further development
  of our business. Accordingly, shareholders should not expect to receive any
  dividends on their shares.

Hagensborg Risk Factors

The business of our subsidiary, Hagensborg, is subject to
  a number of risks due to the nature of the business and its present state of
  development. Prospective purchasers should consider carefully, among other factors
  set forth in the prospectus, the following:

Our new products will be competing against well established
  chocolate and gourmet food companies.

Our chocolate and gourmet food products compete in markets
  dominated by extremely large, well financed and internationally recognized companies.
  Our ability to compete will depend upon developing our brand recognition and
  distribution methods, while our competitors already have well established brands
  and distribution and many times our financial ability. Focused competition by
  such giants could substantial limit our potential market and ability to profit
  from these products. Such competition may result in reduced sales, reduced margins
  or both.

We may face product liability for the products we manufacture
  and sell.

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As a business which manufactures and markets products for
  use by consumers, we may become liable for any damage caused by our products
  when used in the manner intended. Any such claim of liability, whether meritorious
  or not, could be time-consuming and result in costly litigation. Although we
  maintain general liability insurance, our insurance may not cover potential
  claims of the types described above or may not be adequate to indemnify us for
  all liability that may be imposed. Any imposition of liability that is not covered
  by insurance or is in excess of insurance coverage could harm our business.

We are a niche marketing business and can be greatly
  affected by overall economic trends.

Hagensborg may be considered to be a niche marketer of gourmet
  foods. Gross sales of gourmet foods are affected by the overall economic environment
  which in turn governs consumer spending. As a result, downturns in the overall
  economic environment could result in a decrease in demand for such products
  and a reduction in both gross sales and margins of Hagensborg.

Our sales can be greatly affected by changes in consumer
  tastes and preferences.

Consumer tastes in gourmet foods are inherently volatile.
  Hagensborg is dependent upon its ability to gauge the taste of consumers and
  provide products that satisfy that demand. Consumer tastes may change rapidly
  and Hagensborg may not be able to market foods which consumers wish to purchase,
  resulting in a significant reduction in sales and resultant revenues.

Our ability to succeed is dependent upon our ability
  to grow as well as our ability to manage growth.

The growth of HFL is dependent to a significant degree on
  its ability to expand the marketing and sales activity to generate additional
  sales, and our ability to update and expand its product line. In the past two
  years HFL has introduced four new lines of chocolate bars, Mountain Ridge, Peaks,
  Leoni and low carbohydrate chocolate bars, and expanded the Kiss Me line. The
  financial performance of HFL is also dependent upon its management’s ability
  to manage the resulting expanded operations. HFL may not increase its sales
  of existing products or develop and sell new products on a profitable basis.

Natural Program Risk Factors

The business of Natural Program is subject to a number of
  risks due to the nature of the business and its present state of development.
  Prospective purchasers should consider carefully, among other factors set forth
  in the prospectus, the following:

We are competing against well established sellers of
  Chinese herbal medicine in a unique manner.

Traditional sellers of Chinese herbal medicine are typically
  ethnic Chinese practitioners who individually prepare formulations for steeping
  as a drink. Sales of traditional practitioners are generally repeat customers
  and referrals. As a result, entry into this market can be difficult. In addition,
  we prepare formulations in gelatin capsules for easier consumption. We cannot
  be sure that we will be able to significantly capture market share from traditional
  practitioners or that the use of gelatin capsules will be acceptable to consumers.

We may face product liability for the products we manufacture
  and sell.

As a business that manufactures and markets products for use
  by consumers, we may become liable for any damage caused by our products when
  used in the manner intended. Any such claim of liability, whether meritorious
  or not, could be time-consuming and result in costly litigation. Although we
  maintain general liability insurance, our insurance may not cover potential
  claims of the types described above or may not be adequate to indemnify us for
  all liability that may be imposed. Any imposition of liability that is not covered
  by insurance or is in excess of insurance coverage could harm our business.

16

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We may become subject to government regulation of herbal
  remedies, which could adversely affect our ability to sell our products.

The regulatory environment governing herbal remedies vary from
  country to country and are being changed at an unpredictable rate. The success
  of Natural Program is dependent to a significant degree on its ability to comply
  with industry regulations for product labeling, testing, and the like. If NPI
  is unsuccessful in identifying and complying with changing industry regulations,
  there may be a material adverse effect on its results. The Food and Drug Administration
  in the US currently requires that manufacturers, processors and packagers of
  food, drugs, medical equipment and blood follow Good Manufacturing Practices.
  As of January 1st, 2004 the Natural Health Products Directorate became
  the regulating body for natural health products (“NHP”) in
  Canada. Previous regulations were defined by the Food and Drug Regulations.
  The new regulations will affect manufacturers, distributors, importers, labelers
  and packagers of NHP.

Item 3. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures

Our Chief Executive Officer and Chief Financial Officer evaluated
  our “disclosure controls and procedures” (as defined in Rule
  13a-14 (c) of the Securities Exchange Act of 1934 (the "Exchange Act")
  as of a date within 90 days before the filing date of this report and has concluded
  that as of the evaluation date, our disclosure controls and procedures are effective
  to ensure that information we are required to disclose in reports that we file
  or submit under the Exchange Act is recorded, processed, summarized and reported
  within the time periods specified in the Securities and Exchange Commission's
  rules and forms.

(b) Changes in internal controls.

Subsequent to the date of their evaluation, there were no
  significant changes in our internal controls or in other factors that could
  significantly affect these controls. There were no significant deficiencies
  or material weaknesses in our internal controls so no corrective actions were
  taken.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

A lawsuit was commenced against Hagensborg, the Company’s
  wholly owned subsidiary, in the Ontario Superior Court of Justice bearing Court
  File No. 04-CV-269496CM1 by Kraft Foods Schweiz AG and Kraft Canada Inc.

Pursuant to the Rules of Civil Procedure in the Ontario
  courts, the attended a mediation session on February 28, 2005, at which time
  the matter was settled. The terms of the settlement were confidential, but the
  Company has no further liability pursuant to the settlement.

Item 2. Unregistered Sales of Equity Securities and Use
  of Proceeds.

Pursuant to a resolution dated September 10, 2004, on November
  9, 2004 the Company issued 1,555,000 shares of its common stock to ten key employees
  and consultants of the Company and its subsidiary Hagensborg and as consideration
  for services. The shares were issued at a deemed price of $0.02 per share,
  which was the market price of the shares at that time. The resolution stated
  that the shares would not be issued until November, 2004.. Of the shares issued,
  500,000 shares were issued to control persons of the Company, as follows: C.
  Robin Relph, the Company’s President, Chief Executive Officer and Chief
  Financial Officer received 300,000 shares, G. Arnold Armstrong, a director of
  the Company, received 100,000 shares and Jurgen Wolf, a director of the Company,
  received 100,000 shares.

On January 10, 2005, the Company entered into an agreement
  with its general manager granting stock options to purchase up to 250,000 common
  shares at a price of $0.10 US per share, exercisable for a period of five
  years after the date of granting to be vested as follows:

17

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| | (a) | 16% vesting 90 days after the date of granting;                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                  
| | (b) | 14% vesting every three months thereafter so that
        the options shall be fully vested twenty-one months after the date of
        granting.

In March, 2005 the Company entered into subscription agreements
  pursuant to which the Company received private equity placements for an aggregate
  of 16,520,044 units, which was paid for by the conversion of $977,044.40
  worth of debt and $675,000 in cash. The units were priced at $0.10 each.
  Each unit consisted of one share of common stock and a one-half non-transferable
  warrant. Each full warrant allows the purchase one share by the cash payment
  of the exercise price of $0.20 per share, exercisable for a period of two
  years from the date of issuance. Of the units issued, 900,000 units were purchased
  by C. Robin Relph, the Company’s President, Chief Executive Officer and
  Chief Financial Officer, for cash, 500,000 units were purchased by Jurgen Wolf,
  a director of the Company, converted from a loan owed to Mr. Wolf, and 1,520,044
  were purchased by companies controlled by G. Arnold Armstrong, a director of
  the Company, in conversion of debt.

The Company did not employ an underwriter in connection with
  the issuance of the securities described above. We believe that the issuance
  of the foregoing securities was exempt from registration under Section 4(2)
  of the Securities Act of 1933, as amended, as transactions not involving a public
  offering, and the rules promulgated thereunder. Each of the recipientsacquired
  the securities for investment purposes only and not with a view to distribution
  and had adequate information about the Company.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

On March 16, 2005, the Company’s subsidiary, Hagensborg
  Foods Ltd. (“Hagensborg”), entered into an agreement with Turner
  Duckworth, a firm in the business of designing logos, packaging and complete
  identifies for new and continuing brands. The agreement is attached hereto as
  Exhibit 10.1. Pursuant to the agreement, Turner Duckworth agreed to create for
  the Company a new corporate logo, design business cards and letterhead, and
  create design molds, illustrations, new packaging and new displays for a new
  line of chocolate products for Hagensborg. The agreement covered a term of one
  year, ending on November 2005. As part consideration for the services, Turner
  Duckworth agreed to accept 1,100,000 shares of the common stock of the Company,
  registered on S-8, at a deemed price of $0.10 per share, which was market
  price on the date of the agreement. Under the agreement, the Company will own
  all copyright all elements of the designs created by Turner Duckworth for the
  Company.

On March 22, 2005, we filed a Form S-8 Registration Statement
  to register an aggregate total of 3,000,000 shares of our common stock in connection
  with the Company’s 2005 Non-Qualified Stock Compensation Plan (the “2005
  Plan”). The 2005 Plan authorizes the issuance of a maximum of 3,000,000
  common shares in the capital of the Company. During the quarter ended March
  31, 2005, the Company issued 2,980,000 of shares of our common stock to consultants
  pursuant to the 2005 Plan. All of the shares were issued at a deemed price of
  $0.10 per share, which was the market price at the date of each of the consulting
  agreements.

Item 6. Exhibits and Reports on Form 8-K

|10.1 | Agreement between Hagensborg Foods Ltd and
      Turner Duckworth dated March 16, 2005
|---- | --------------------------------------------------------------------------------------
|     |                                                                                       
|31.1 | Rule 13a-14(a)/15d-14(a) Certification of CEO
      & CFO                             
|     |                                                                                       
|32.1 | Section 906 Certification of CEO & CFO                                                

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SIGNATURES

In accordance with the requirements of the Exchange Act, the
  registrant caused this report to be signed on its behalf by the undersigned,
  thereunto duly authorized.

Date: May 23, 2005

GARUDA CAPITAL CORP.
  (Issuer)

|By: | /s/C.
      Robin Relph                                                                                                               | 
|--- | ------------------------------------------------------------------------------------------------------------------------------------- | 
|    | C. Robin Relph, President, Chief Executive Officer,
      Chief Financial Officer 
      (Principal Financial and Accounting Officer)



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