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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 10-QSB

ý QUARTERLY REPORT
  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended December 31, 2005

Or

oTRANSITION REPORT
  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ___________ To ___________

Commission file number 0  30927

Garuda Capital Corp.(Exact name of registrant as specified in its charter)

|Nevada                                                         | 980209053                           
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
|                                                               |                                     
|502-1978 Vine Street, Vancouver, BC                            | V6K 4S1                             
|(Address of principal executive offices)                       | (Zip Code)                          

604-737-0203(Registrants telephone number, including area code)

______________________
  (Former name, former address and former fiscal year, if changed since last report)

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

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

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

Indicate by check mark whether the registrant has filed all
  documents and reports required to be filed by Sections 12, 13 or 15(d) of the
  Securities Exchange Act of 1934 subsequent to the distribution of securities
  under a plan confirmed by a court.

o Yes    o
  No

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuers
  classes of common stock, as of the latest practicable date.

Common Stock, $0.001 par value, 39,272,784 shares as of
  February 8, 2006

---

-2-

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying financial statements of Garuda Capital Corp. (the Company, we, our, us) for the six months ended December 31, 2005 and December 31, 2004, have been prepared by the Companys
management and they do not include all information and notes to the financial statements necessary for a complete presentation of the financial position, results of operations and cash flows, in conformity with accounting principles generally
accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal
recurring nature.

Operating results for the six months ended December 31, 2005, are not necessarily indicative of the results that can be expected for the year ending June 30, 2006. All currency references in this report are in US dollars unless otherwise noted.

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-3-



CONSOLIDATED FINANCIAL STATEMENTS



|1. | CONSOLIDATED BALANCE
        SHEETS                        
|-- | -----------------------------------------------------------
|   |                                                            
|2. | CONSOLIDATED STATEMENTS
        OF OPERATIONS              
|   |                                                            
|3. | CONSOLIDATED STATEMENTS
        OF STOCKHOLDERS DEFICIENCY
|   |                                                            
|4. | CONSOLIDATED STATEMENTS
        OF CASH FLOWS              
|   |                                                            
|5. | NOTES TO CONSOLIDATED
        FINANCIAL STATEMENTS         

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|-4-                                
|-----------------------------------
|GARUDA CAPITAL CORP.               
|Consolidated Balance Sheets        
|December 31, 2005 and June 30, 2005

|                                                               |   | US Dollars    |  
|-------------------------------------------------------------- | - | ------------- | -
|                                                               |   | Dec. 31, 2005 |  
|                                                               |   |               |  
|ASSETS                                                         |   |               |  
|CURRENT ASSETS                                                 |   |               |  
|Accounts receivable                                            | $ | 129,113       |  
|Marketable securities                                          |   | 19,727        |  
|Inventory (Note 4)                                             |   | 399,251       |  
|Prepaid expenses and deferred charges                          |   | 99,991        |  
|TOTAL CURRENT ASSETS                                           |   | 648,082       |  
|                                                               |   |               |  
|PROPERTY AND EQUIPMENT                                         |   |               |  
|Machinery and equipment, net of accumulated
      depreciation |   | 194,408       |  
|TOTAL PROPERTY AND EQUIPMENT                                   |   | 194,408       |  
|                                                               |   |               |  
|OTHER ASSETS                                                   |   |               |  
|Patents and trademarks, net of accumulated
      amortization  |   | 13,578        |  
|TOTAL OTHER ASSETS                                             |   | 13,578        |  
|                                                               |   |               |  
|TOTAL ASSETS                                                   | $ | 856,068       |  
|                                                               |   |               |  
|LIABILITIES AND STOCKHOLDERS' DEFICIENCY                       |   |               |  
|CURRENT LIABILITIES                                            |   |               |  
|Bank indebtedness (Note 5)                                     | $ | 82,491        |  
|Accounts payable and accrued expenses (Note 3)                 |   | 645,539       |  
|Bank loan (Note 5)                                             |   | 155,000       |  
|Note payable  related party (Note 3)                          |   | 510,862       |  
|Capital lease obligation                                       |   | 1,148         |  
|TOTAL CURRENT LIABILITIES                                      |   | 1,395,040     |  
|                                                               |   |               |  
|LONG TERM LIABILITIES                                          |   |               |  
|Government loan                                                |   | 14,245        |  
|TOTAL LIABILITIES                                              |   | 1,409,285     |  
|                                                               |   |               |  
|COMMITMENTS AND CONTINGENCIES (Note 7)                         |   |               |  
|                                                               |   |               |  
|STOCKHOLDERS' DEFICIENCY                                       |   |               |  
|Preferred stock, $0.01 par value;
      10,000,000 shares      |   | -             |  
|Authorized, none issued and outstanding                        |   |               |  
|Common stock, $0.001 par value;
      100,000,000 shares       |   | 36,565        |  
|Authorized, 36,564,784 and 34,655,620
      shares issued and  |   |               |  
|outstanding                                                    |   |               |  
|Additional paid-in capital                                     |   | 5,370,594     |  
|Contra equity (Note 10)                                        |   | (84,500       | )
|Accumulated deficit                                            |   | (5,877,826    | )
|Accumulated other comprehensive
      gain/(loss)              |   | 1,950         |  
|TOTAL STOCKHOLDERS' DEFICIENCY                                 |   | (553,217      | )
|                                                               |   |               |  
|TOTAL LIABILITIES AND STOCKHOLDERS'                            |   |               |  
|DEFICIENCY                                                     | $ | 856,068       |  

The accompanying notes are an integral part of these
statements.

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|-5-                                             
|------------------------------------------------
|GARUDA CAPITAL CORP.                            
|Consolidated Statements of Operations           
|For the periods ended December 31, 2005 and 2004
|(Unaudited)                                     

|                                                     |  | Three months ended December 31 |   |  | Six months ended December 31 |  
|---------------------------------------------------- |  | ------------------------------ | - |  | ---------------------------- | -
|                                                     |  | 2005                           |   |  | 2004                         |  
|REVENUE                                              |  |                                |   |  |                              |  
|                                                     |  |                                |   |  |                              |  
|SALES                                                |  | 262,921                        |   |  | 367,765                      |  
|                                                     |  |                                |   |  |                              |  
|COST OF SALES                                        |  | 241,284                        |   |  | 321,502                      |  
|                                                     |  |                                |   |  |                              |  
|GROSS PROFIT                                         |  | 21,637                         |   |  | 46,263                       |  
|                                                     |  |                                |   |  |                              |  
|EXPENSES                                             |  |                                |   |  |                              |  
|                                                     |  |                                |   |  |                              |  
|General and administrative                           |  | 220,389                        |   |  | 147,562                      |  
|Legal and accounting                                 |  | 74,839                         |   |  | 24,459                       |  
|Depreciation and amortization                        |  | 3,260                          |   |  | 2,758                        |  
|Advertising and promotion                            |  | 92,419                         |   |  | 28,959                       |  
|Premises leases                                      |  | 42,474                         |   |  | 45,647                       |  
|Total Operation Expenses                             |  | 433,381                        |   |  | 249,385                      |  
|                                                     |  |                                |   |  |                              |  
|LOSS FROM OPERATIONS                                 |  | (411,744                       | ) |  | (203,122                     | )
|                                                     |  |                                |   |  |                              |  
|OTHER INCOME (EXPENSE)                               |  |                                |   |  |                              |  
|Foreign currency transaction income (loss)           |  | (4,367                         | ) |  | -                            |  
|Gain (loss) on sale of marketable
      securities   |  | -                              |   |  | -                            |  
|Other income                                         |  | 31,933                         |   |  | -                            |  
|Interest expense (Note 3)                            |  | (19,699                        | ) |  | (11,535                      | )
|Total Other Income
      (Expense)                   |  | 7,867                          |   |  | (11,535                      | )
|                                                     |  |                                |   |  |                              |  
|NET LOSS                                             |  | (403,877                       | ) |  | (214,657                     | )
|                                                     |  |                                |   |  |                              |  
|OTHER COMPREHENSIVE INCOME                           |  |                                |   |  |                              |  
|Gain on foreign currency translation                 |  | 7,963                          |   |  | 23,698                       |  
|Reclassification of unrealized gain on available for |  |                                |   |  |                              |  
|sale securities                                      |  |                                |   |  |                              |  
|Unrealized gain on available for sale of marketable  |  |                                |   |  |                              |  
|securities                                           |  | 19,727                         |   |  | -                            |  
|                                                     |  |                                |   |  |                              |  
|COMPREHENSIVE LOSS                                   |  | (376,187                       | ) |  | (190,959                     | )
|                                                     |  |                                |   |  |                              |  
|NET LOSS PER COMMON SHARE,                           |  |                                |   |  |                              |  
|BASIC AND DILUTED                                    |  | (0.01                          | ) |  | (0.03                        | )
|                                                     |  |                                |   |  |                              |  
|WEIGHTED AVERAGE NUMBER                              |  |                                |   |  |                              |  
|OF COMMON SHARES OUTSTANDING,                        |  |                                |   |  |                              |  
|BASIC AND DILUTED                                    |  | 35,992,893                     |   |  | 7,410,242                    |  

The accompanying notes are an integral part of these
statements.

---

|Garuda Capital Corp.           |                                                     |                            
|------------------------------ | --------------------------------------------------- | ---------------------------
|                               | CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIENCY |                            
|Period ended December 31, 2005 |                                                     | (Expressed in U.S. dollars)
|(Unaudited)                    |                                                     |                            

|                                                                           |  |              |  |  |         |  |  |             |  |  |               |   |  | Accumulated |   |  |               |   |  |            |  
|-------------------------------------------------------------------------- |  | ------------ |  |  | ------- |  |  | ----------- |  |  | ------------- | - |  | ----------- | - |  | ------------- | - |  | ---------- | -
|                                                                           |  |              |  |  |         |  |  | Additional  |  |  |               |   |  | other       |   |  |               |   |  | Total      |  
|                                                                           |  | Common stock |  |  | paid-in |  |  | Accumulated |  |  | comprehensive |   |  | Contra      |   |  | Stockholders' |  
|                                                                           |  | Shares       |  |  | Amount  |  |  | capital     |  |  | deficit       |   |  | loss        |   |  | equity        |   |  | equity     |  
|                                                                           |  | #            |  |  | $       |  |  | $           |  |  | $             |   |  | $           |   |  | $             |   |  | $          |  
|                                                                           |  |              |  |  |         |  |  |             |  |  |               |   |  |             |   |  |               |   |  |            |  
|Balance, June 30, 2003                                                     |  | 6,299,576    |  |  | 6,300   |  |  | 2,437,389   |  |  | (2,728,160    | ) |  | (47,045     | ) |  |              |   |  | (331,516   | )
|Shares issued for services at $0.30 per share                              |  | 74,000       |  |  | 74      |  |  | 7,326       |  |  |              |   |  |            |   |  |              |   |  | 7,400      |  
|Gain/loss on foreign currency translation                                  |  |             |  |  |        |  |  |            |  |  |              |   |  | (8,116      | ) |  |              |   |  | (8,116     | )
|Unrealized gain on available for sale securities                           |  |             |  |  |        |  |  |            |  |  |              |   |  | 51,770      |   |  |              |   |  | 51,770     |  
|Net loss for the year ended June 30, 2004                                  |  |             |  |  |        |  |  |            |  |  | (844,595      | ) |  |            |   |  |              |   |  | (844,595   | )
|Balance, June 30, 2004                                                     |  | 6,373,576    |  |  | 6,374   |  |  | 2,444,715   |  |  | (3,572,755    | ) |  | (3,391      | ) |  |              |   |  | (1,125,057 | )
|Shares issued for compensation at $0.02 per
      share                    |  | 1,555,000    |  |  | 1,555   |  |  | 29,545      |  |  |              |   |  |            |   |  |              |   |  | 31,100     |  
|Shares issued for compensation at $0.10 per share                          |  | 800,000      |  |  | 800     |  |  | 79,200      |  |  |              |   |  |            |   |  |              |   |  | 80,000     |  
|Shares issued for services at $0.10 per
      share                        |  | 2,980,000    |  |  | 2,980   |  |  | 295,020     |  |  |              |   |  |            |   |  |              |   |  | 298,000    |  
|Shares issued for services at $0.12 per share                              |  | 3,000,000    |  |  | 3,000   |  |  | 357,000     |  |  |              |   |  |            |   |  |              |   |  | 360,000    |  
|Shares issued for services at $0.15 per
      share                        |  | 27,000       |  |  | 27      |  |  | 4,023       |  |  |              |   |  |            |   |  |              |   |  | 4,050      |  
|Shares issued for debt at $0.10 per share                                  |  | 11,170,044   |  |  | 11,170  |  |  | 1,105,834   |  |  |              |   |  |            |   |  |              |   |  | 1,117,004  |  
|Shares issued for cash at $0.10 per share                                  |  | 8,750,000    |  |  | 8,750   |  |  | 866,250     |  |  |              |   |  |            |   |  |              |   |  | 875,000    |  
|Gain/loss on foreign currency translation                                  |  |             |  |  |        |  |  |            |  |  |              |   |  | (32,467     | ) |  |              |   |  | (32,467    | )
|Unrealized loss on available for sale
      securities                     |  |             |  |  |        |  |  |            |  |  |              |   |  | (88,277     | ) |  |              |   |  | (88,277    | )
|Net loss for the
      year ended June 30, 2005                            |  |             |  |  |        |  |  |            |  |  | (1,365,993    | ) |  |            |   |  |              |   |  | (1,365,993 | )
|                                                                           |  | 34,655,620   |  |  | 34,656  |  |  | 5,181,587   |  |  | (4,938,748    | ) |  | (124,135    | ) |  |              |   |  | 153,360    |  
|Contra equity                                                              |  |             |  |  |        |  |  |            |  |  |              |   |  |            |   |  | (418,667      | ) |  | (418,667   | )
|Balance, June 30, 2005                                                     |  | 34,655,620   |  |  | 34,656  |  |  | 5,181,587   |  |  | (4,938,748    | ) |  | (124,135    | ) |  | (418,667      | ) |  | (265,307   | )
|Shares issued for cash at $0.10 per share                                  |  | 175,000      |  |  | 175     |  |  | 17,325      |  |  |              |   |  |            |   |  |              |   |  | 17,500     |  
|Contra equity                                                              |  |              |  |  |         |  |  |             |  |  |              |   |  |            |   |  | 334,167       |   |  | 334,167    |  
|Shares issued for services at $0.10 per share                              |  | 125,000      |  |  | 125     |  |  | 12,375      |  |  | ---           |   |  | ---         |   |  | ---           |   |  | 12,500     |  
|Shares issued for debt                                                     |  | 1,609,000    |  |  | 1,609   |  |  | 159,307     |  |  |              |   |  |            |   |  |              |   |  | 160,916    |  
|Gain/Loss on foreign currency translation                                  |  |             |  |  |        |  |  |            |  |  |              |   |  | 18,081      |   |  |              |   |  | 18,081     |  
|Reclassification of unrealized loss on
      available for sale securities |  |             |  |  |        |  |  |            |  |  |              |   |  | 88,277      |   |  |              |   |  | 88,277     |  
|Unrealized gain on available for sale securities                           |  | ---          |  |  | ---     |  |  | ---         |  |  | ---           |   |  | 19,727      |   |  | ---           |   |  | 19,727     |  
|Net loss for the six months ended December 31, 2005                        |  |             |  |  |        |  |  |            |  |  | (939,078      | ) |  |            |   |  |              |   |  | (939,078   | )
|Balance,
      December 31, 2005                                           |  | 36,564,784   |  |  | 36,565  |  |  | 5,370,594   |  |  | (5,877,826    | ) |  | 1,950       |   |  | (84,500       | ) |  | (553,217   | )

Theaccompanyingnotes are anintegralpart of thesestatements.

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|-6-                                 
|------------------------------------
|                                    
|GARUDA CAPITAL CORP.                
|Consolidated Statements of Cash Flow
|December 31, 2005 and 2004          

|(Unaudited)                                                        |  | Six months ended December 31 |  
|------------------------------------------------------------------ |  | ---------------------------- | -
|                                                                   |  | 2005                         |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                              |  |                              |  
|Net loss                                                           |  | (939,078                     | )
|Adjustments to reconcile net loss to
      net cash:               |  |                              |  
|Depreciation and amortization                                      |  | 23,580                       |  
|Consulting
      services paid in common stock in prior year       |  | 334,167                      |  
|Common stock issued for services                                   |  | 12,500                       |  
|Common stock
      issued for interest                             |  | 859                          |  
|Debt interest converted to note payable  related party            |  | 16,882                       |  
|Loss (gain) from
      sale of marketable securities               |  | 21,743                       |  
|Changes in net working
      capital items:                        |  |                              |  
|Accounts
      receivable                                          |  | (45,017                      | )
|Prepaid expenses and deferred charges                              |  | (73,523                      | )
|Inventory                                                          |  | (121,299                     | )
|Accounts payable and accrued expenses                              |  | 300,647                      |  
|Net
      cash used in operating activities                        |  | (468,539                     | )
|                                                                   |  |                              |  
|CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:                       |  |                              |  
|Purchase of machinery and equipment                                |  | (11,733                      | )
|Purchase of
      marketable securities                            |  | (63,689                      | )
|Proceeds from sale of marketable securities                        |  | 437,407                      |  
|Net cash provided
      by investing activities                    |  | 361,985                      |  
|                                                                   |  |                              |  
|CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:                       |  |                              |  
|Increase/(decrease) in
      bank indebtedness                     |  | (12,262                      | )
|Decrease in bank loan                                              |  | (30,000                      | )
|Decrease in capital
      lease obligations                        |  | (1,227                       | )
|Common stock issued for cash                                       |  | 17,500                       |  
|Increase in note
      payable  related party                     |  | 129,351                      |  
|Net cash provided
      by financing activities                    |  | 103,362                      |  
|                                                                   |  |                              |  
|Effect of exchange rate changes on cash
      and cash equivalents |  | (3,192                       | )
|                                                                   |  |                              |  
|Net increase (decrease) in cash                                    |  | -                            |  
|                                                                   |  |                              |  
|Cash at beginning of period                                        |  | -                            |  
|                                                                   |  |                              |  
|Cash at end of period                                              |  | -                            |  
|                                                                   |  |                              |  
|NON-CASH FINANCING AND INVESTING ACTIVITIES:                       |  |                              |  
|Common stock issued for
      debt                                 |  | 160,916                      |  
|Common stock issued for services                                   |  | 12,500                       |  

The accompanying notes are an integral part of these
statements.

---

|-7-                                                 
|----------------------------------------------------
|                                                    
|GARUDA CAPITAL CORP.                                
|Condensed Notes to Consolidated Financial Statements
|December 31, 2005 and 2004 (US Dollars)             
|(Unaudited)                                         

NOTE 1  BASIS OF PRESENTATION

The foregoing unaudited interim consolidated 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
consolidated financial statements should be read in conjunction with the Companys audited consolidated financial statements for the year ended June 30, 2005.  In the opinion of management, the unaudited interim consolidated 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 management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

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 loss presented.

Operating results for the six-month period ended December 31, 2005 are not necessarily indicative of the results that may be expected for the year ending June 30, 2006.

NOTE 2  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 December 31, 2005, the Company had an accumulated deficit of $5,877,826 and limited cash resources. For the six months ended December 31, 2005, the Company sustained a net loss of $939,078. These factors, among others, raise
substantial doubt about its ability to continue as a going concern. 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.

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|-8-                                                 
|----------------------------------------------------
|                                                    
|GARUDA CAPITAL CORP.                                
|Condensed Notes to Consolidated Financial Statements
|December 31, 2005
      and 2004 (US Dollars)       

NOTE 3  RELATED PARTY TRANSACTIONS

The Company is indebted to certain shareholders as follows:

|                                                          |   | December 31, |  |   | June
      30, | 
|--------------------------------------------------------- | - | ------------ |  | - | -------------- | 
|                                                          |   | 2005         |  |   | 2005           | 
|Shareholder notes bearing interest at 10%,                |   |              |  |   |                | 
|No specific due dates,
      collateralized by            |   |              |  |   |                | 
|all personal
      property of Hagensborg Foods Ltd. and  |   |              |  |   |                | 
|Garuda Capital Corporation.                               | $ | 57,424       |  | $ | 54,670         | 
|Shareholder note bearing interest at 15%,                 |   |              |  |   |                | 
|no specified due date, unsecured                          |   | 207,562      |  |   | 260,056        | 
|Shareholder convertible note bearing
      interest at 1% |   |              |  |   |                | 
|per month, due June 30, 2006                              |   | 0            |  |   | 100,000        | 
|Advances from shareholders, unsecured,
      bearing      |   |              |  |   |                | 
|interest at 10% with no specific
      due dates          |   | 245,876      |  |   | 109,832        | 
|                                                          | $ | 510,862      |  | $ | 524,558        | 

During six months ended December 31, 2005, $60,916 of loans
from related party have been converted into common stock at $0.10 per share.

During six months ended December 31, 2005, $100,000 of
convertible note from related party was converted to 1,000,000 units of common
stock with a price of $0.10 per unit.

See Note 9 for further discussions of common stock.

At December 31, 2005, the Company had a balance due to related
parties for services rendered in the amount of $118,579 contained in accounts
payable.

For the six months ended December 31, 2005, interest expense on
related party loans totalled $22,740 and is included in interest expense.

NOTE 4  INVENTORY

Inventories are stated at the lower of average cost or net
realizable value. 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 $0 for inventory obsolescence in both periods.

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

---

|-9-                                                 
|----------------------------------------------------
|                                                    
|GARUDA CAPITAL CORP.                                
|Condensed Notes to Consolidated Financial Statements
|December 31, 2005 and 2004 (US Dollars)             

NOTE 4  INVENTORY  Continued

|                   |   | December 31, 2005 |  |   | June
      30, 2005 | 
|------------------ | - | ----------------- |  | - | ------------------- | 
|Packaging supplies | $ | 224,245           |  | $ | 175,553             | 
|Finished goods     |   | 121,965           |  |   | 59,140              | 
|Raw materials      |   | 52,876            |  |   | 37,666              | 
|Other supplies     |   | 165               |  |   | 5,593               | 
|                   | $ | 399,251           |  | $ | 277,952             | 

NOTE 5  BANK INDEBTEDNESS AND BANK LOANS

Demand Loan

The Company has a demand loan facility from a bank in the
amount of $200,000, which is personally guaranteed by a shareholder of the
Company. Outstanding advances at December 31, 2005 of $155,000 bear interest at
the banks base rate plus 2%, payable on demand by the bank. The loan is
collateralized by all present and future personal property of Hagensborg Foods
Ltd.

Overdraft

The Company has a bank overdraft facility in the amount of
$100,000. Outstanding advances bear interest at the banks base rate plus 2% per
annum, payable monthly. At December 31, 2005 and June 30, 2005, the Company had
a net outstanding balance of $82,491 and $94,754, respectively, on this
overdraft facility. The facility is personally guaranteed by a shareholder of
the Company and collateralized by all present and future personal property of
Hagensborg Foods Ltd.

See Note 7 for further discussions of bank loans.

NOTE 6  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 about operating 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 for the company. These segments are
defined by product line.

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

---

|-10-                                                
|----------------------------------------------------
|                                                    
|GARUDA CAPITAL CORP.                                
|Condensed Notes to Consolidated Financial Statements
|December 31, 2005
      and 2004 (US Dollars)       

NOTE 6  SEGMENT INFORMATION  Continued

|                    |   |                  |   |   | Six Months Ended December 31, 2005       |   |   |         |  
|------------------- | - | ---------------- | - | - | ---------------------------------------- | - | - | ------- | -
|                    |   |                  |   |   |                                          |   |   |         |  
|                    |   | Hagensborg       |   |   | Hagensborg                               |   |   | Natural |  
|                    |   |                  |   |   | Seafoods                                 |   |   | Program |  
|                    |   | Foods
      Ltd. |   |   | Ltd.                                     |   |   | Inc.    |  
|                    |   |                  |   |   |                                          |   |   |         |  
|Sales               | $ | 317,366          |   | $ | -                                        |   | $ | 36,668  |  
|Gross profit (loss) | $ | 13,102           |   | $ | -                                        |   | $ | (3,039  | )
|Other               |   |                  |   |   |                                          |   |   |         |  
|income(expense)     | $ | 5,770            |   | $ | -                                        |   | $ | -       |  
|Net loss            | $ | (638,930         | ) | $ | (72                                      | ) | $ | (18,508 | )
|Segment assets      | $ | 783,416          |   | $ | 0                                        |   | $ | 40,257  |  
|                    |   |                  |   |   |                                          |   |   |         |  
|                    |   |                  |   |   |                                          |   |   |         |  
|                    |   |                  |   |   | Six Months
      Ended December 31, 2004 |   |   |         |  
|                    |   |                  |   |   |                                          |   |   |         |  
|Sales               | $ | 291,554          |   | $ | 151,853                                  |   | $ | 46,361  |  
|Gross profit (loss) | $ | 66,208           |   | $ | 65,862                                   |   | $ | (9,790  | )
|Other               |   |                  |   |   |                                          |   |   |         |  
|income(expense)     | $ | -                |   | $ | -                                        |   | $ | -       |  
|Net income (loss)   | $ | (382,638         | ) | $ | 64,832                                   |   | $ | (35,781 | )
|Segment assets      | $ | 1,309,257        |   | $ | 81,345                                   |   | $ | 38,525  |  

NOTE 7  COMMITMENTS AND CONTINGENCIES

|(a) | Pursuant to the Companys bank loan agreement (discussed
      in Note 5), the Companys ratio of current assets to current liabilities
      cannot exceed 1.2 to 1.0. At December 31, 2005 and June 30, 2005, the
      Company was in violation of this condition. At December 31, 2005 and June
      30, 2005, the company was also in violation of a second covenant whereby
      the Company's ratio of debt to tangible net worth may not exceed 3.0 to
      1.0. The bank has waived any action until March 31, 2006.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(b) | During the year ended June 30, 2005, Garuda Gold
      Corporation, a wholly owned subsidiary, entered into a Letter of Intent to
      earn the exclusive right and option to acquire a 65% right and interest in
      and to the Mining Rights to mine rock vein system in an area in Prestia,
      Ghana.                                                                                                                                                                                                                  

---

|-11-                                                
|----------------------------------------------------
|                                                    
|GARUDA CAPITAL CORP.                                
|Condensed Notes to Consolidated Financial Statements
|December 31, 2005
      and 2004 (US Dollars)       

NOTE 7  COMMITMENTS AND CONTINGENCIES  Continued

|    | In order to have the option exercised, Garuda Gold Corporation
        must, on or before May 17, 2006, incur direct or indirect expenses totalling
        $300,000 on a program of work in respect of this particular mining right.                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                           
|    | No expenses have been incurred on this mining right
        to date.                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                           
|(c) | During the year ended June30, 2005, Garuda Minerals
        Inc., a wholly owned subsidiary, entered into a Letter of Intent to earn
        the exclusive right and option to acquire 65% right, title and interest
        in and to an exploration license on an area of approximately 200 km2located near the town of Ho in the Volta region of Ghana.
|    |                                                                                                                                                                                                                                                                                                                                                           
|    | In order to have the option exercised, Garuda Minerals
        Inc. must, on or before May 17, 2006, incur direct or indirect expenses
        totalling $300,000 on a program of work in respect of this particular
        property.                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                           
|    | No expenses have been incurred on this property to date.                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                           
|(d) | On January 3, 2006, Jansen Blyth Enterprises Inc., commenced a small claims
      action against Hagensborg Foods Ltd., for $12,465 (Can.$). Hagensborg is
      currently negotiating a settlement. If a settlement is not reached, the
      action will be set down for a settlement conference.                                                       

NOTE 8  STOCK OPTIONS

At December 31, 2005, 8,000,000 stock options were available
for future grant under the 2005 Stock Option Plan and 140,000 stock options were
available for grant (subject to vesting requirements) pursuant to an employment
agreement.

|                                 |  |           |  |  | Options
      outstanding |  
|-------------------------------- |  | --------- |  |  | ------------------------- | -
|                                 |  | Shares    |  |  | Number                    |  
|                                 |  | available |  |  | of                        |  
|                                 |  | for grant |  |  | shares                    |  
|                                 |  | #         |  |  | #                         |  
|Balance June 30, 2004            |  | 1,600,000 |  |  | 400,000                   |  
|Options forfeited                |  |           |  |  | (400,000                  | )
|Options vested and granted       |  |           |  |  | 40,000                    |  
|Options exercised                |  |           |  |  |                          |  
|Balance June 30, 2005            |  | 8,210,000 |  |  | 40,000                    |  
|Options vested and
      granted |  |           |  |  | 70,000                    |  
|Balance December 31, 2005        |  | 8,140,000 |  |  | 110,000                   |  

The Company applies APB Opinion No. 25 in accounting for options
  and, accordingly, recognized no compensation cost for its stock options vested
  and granted in the periods ended December 31, 2005 and 2004. The following reflects
  the Companys pro forma net loss and net loss per share as if the fair
  value-based method using the Black-Scholes option pricing model had been applied
  in measuring compensation expense.

---

|-12-                                                
|----------------------------------------------------
|                                                    
|GARUDA CAPITAL CORP.                                
|Condensed Notes to Consolidated Financial Statements
|December 31, 2005
      and 2004 (US Dollars)       

NOTE 8  STOCK OPTION  Continued

|                                                |   | 2005     |   |   | 2004     |  
|----------------------------------------------- | - | -------- | - | - | -------- | -
|                                                | $ |          |   | $ |          |  
|                                                |   |          |   |   |          |  
|Net loss as reported                            |   | (939,078 | ) |   | (418,195 | )
|Compensation expense determined under the       |   |          |   |   |          |  
|fair
      value method                         |   | (8,096   | ) |   | -        |  
|Pro forma net loss                              |   | (947,174 | ) |   | (418,195 | )
|                                                |   |          |   |   |          |  
|Pro forma net loss per share, basic and diluted |   | (0.03    | ) |   | (0.06    | )

The following assumptions were made to measure compensation
expense under the Black-Scholes option pricing model:

Risk-free interest rate 3.75% 
  Expected life 4.0 years 
  Expected volatility 107.85% 
  Dividend yields nil

The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. The weighted average fair value of
stock options under employer stock option plans granted during the period was
$8,096 [2004 - $nil].

In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Companys employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in managements
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

NOTE 9 - COMMON STOCK

[a] Authorized

The Company is authorized to issue up to 100,000,000 shares of
common stock, par value $0.001 per share. The Company is also authorized to
issue up to 10,000,000 shares of preferred stock, par value $0.01 per share.

In July 2005, the Company increased its authorized common stock
from 50,000,000 shares to 100,000,000 shares pursuant to the vote of
stockholders held on June 27, 2005.

[b] Issued and outstanding

---

|-13-                                                
|----------------------------------------------------
|                                                    
|GARUDA CAPITAL CORP.                                
|Condensed Notes to Consolidated Financial Statements
|December 31, 2005
      and 2004 (US Dollars)       

NOTE 9 - COMMON STOCK  Continued

On August 11, 2005 the shareholders convertible note was
converted to 1,000,000 units with a price of $0.10 per unit. Each unit is
comprised of one share of common stock in the Company, and one warrant to
acquire an additional share of the Company at $0.20 for every two units issued
upon conversion.

On August 24, 2005, the Company issued 175,000 shares and
87,500 warrants pursuant to private placements at $0.10 per unit for cash
proceeds of $17,500.

On November 30, 2005, the Company issued 125,000 common shares
with a price of $0.10 per share for the services rendered.

On December 6, 2005, the Company issued 609,164 common shares
with a price of $0.10 per share to one of the shareholders for the consideration
of interest owed to the shareholder to September 30, 2005.

[c] Warrants

As at December 31, 2005, the Company had issued 10,547,522
warrants that had not been exercised. Each warrant allows the purchase of one
share of common stock at an exercise price of $0.20 per share, exercisable for
two years from issuance. The outstanding warrants expire as follows:

|No. of     |  | Expiry      | 
|---------- |  | ----------- | 
|warrants   |  | date        | 
|500,000    |  | June 2006   | 
|8,210,022  |  | March 2007  | 
|1,750,000  |  | June 2007   | 
|87,500     |  | August 2007 | 
|10,547,522 |  |             | 

Any value associated with the outstanding warrants was included
in the original common stock price and included in the additional paid-in
capital.

NOTE 10 - CONTRA EQUITY

During the year ended June 30, 2005 the Company issued common
stock for services, some of which services will be rendered to the Company
subsequent to the period end. The value of the services to be rendered
subsequent to December 31, 2005 totalled $84,500 [June 30, 2005 - $418,667].

---

|-14-                                                
|----------------------------------------------------
|                                                    
|GARUDA CAPITAL CORP.                                
|Condensed Notes to Consolidated Financial Statements
|December 31, 2005
      and 2004 (US Dollars)       

NOTE 11  SUBSEQUENT EVENT

On January 19, 2006, the Companys Board of Directors approved the adoption of a 2006 Non-Qualified Stock Compensation Plan to issue up to 5,000,000 shares of the Company to the Companys employees, executives and consultants and the Board
approved the registration of the Plan on Form S-8.

---

|-15-
|----

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION / PLAN OF OPERATIONS

Forward Looking Statements

This report on Form 10-QSB contains certain forward-looking statements within the meaning of Section 21e of the Securities Exchange Act of 1934, as amended, and other applicable securities laws.  All statements other than statements of
historical fact are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for
future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing.
 Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

Overview

We have seven wholly-owned subsidiaries, Hagensborg Foods Ltd., Hagensborg Seafoods Ltd., Natural Program Inc., Natural Program Ltd., Garuda Gold Corporation, Garuda Minerals Inc. and Garuda Ventures Canada Inc. We have recently acquired mining
interests through Garuda Gold and Garuda Minerals. Garuda Ventures is active only in holding investments in securities.

Through our subsidiary Hagensborg Foods, we are in the business
  of manufacturing and marketing gourmet chocolates and other gourmet foods. Hagensborg
  has recently repackaged its chocolate product line using a fairyland
  theme as its marketing and promotional concept. We market our gourmet chocolate
  products throughout North America and serve high-end departmental and specialty
  stores both in Canada and the US.

Through our subsidiary Natural Program Inc. we operate a Chinese
  herbal pharmacy to dispense high quality Chinese herbs to practitioners and
  market a wholesale line of herbal remedies under the Natural Program name.

Results of Operations for the Six Months ended December 31, 2005 Compared to six months ended December 31, 2004  Garuda Capital Corp. on a Consolidated Basis

During the six months ended December 31, 2005, we realized total revenues of $354,034 compared to $489,768 in revenues for the six months ended December 31, 2004 and we incurred a net loss for the six months ended December 31, 2005 of
$939,078, compared to a net loss of $418,195 for the same period in 2004. The decrease in revenues and resultant increase in net loss for 2005 was as a result of decreased sales for our Hagensborg operations during the six months ended
December 31, 2005 and the increase in operation expenses. As a result of the decreased sales, we are planning a more aggressive strategy in marketing our Hagensborg products. Gross profit for the six months ended December 31,

---

2005 was $10,063compared to $122,280for the same period in 2004.

Our general and administrative costs for the six months ended December 31, 2005 were $413,672 compared to $354,828 for the six months ended December, 2004. These costs consisted primarily of personnel costs, consulting fees, and general
office costs.  The increase in general and administrative costs between the two periods is largely the result of increased legal and accounting expenses.

Our legal and accounting costs for the six months ended December 31, 2005 were $99,872 compared to $37,139 for the six months ended December 31, 2004. This increase is due to additional legal services provided and an increased cost in
accounting services.

Our premise leases were $83,893and $90,948for the six months ended December 31, 2005 and December 31, 2004, respectively.

Our advertising and promotion costs for the six months ended December 31, 2005 were $328,329 and $56,321 for the six months ended December 31, 2004. The increase in advertising and promotion costs between the two periods is largely the
result of our marketing research and product redesign for Hagensborg.

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 the Six Months ended December 31, 2005, Compared to June 30, 2005 on Consolidated Basis.

We believe that sales from Hagensborg and Natural Program will not provide sufficient capital resources to sustain our operations and fund product development throughout the fiscal year ended June 30, 2006. Management has been able, thus far, to
finance the operations through a series of equity and debt financings. While we have received a going concern opinion from our auditors, management plans to continue to seek other sources of financing on favorable terms; however, there
are no assurances that any such financing can be obtained on favorable terms, if at all. Management believes it has implemented significant cost reductions and expects to keep its operating costs to a minimum until cash is available through
financing or operating activities. There is no assurance that the Company will be successful in achieving these goals. 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.

We have financed Hagensborgs operations partly through revenues from operations and bank credit facilities, and partly through the issuance of equity shares, warrants 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 the Company for capital resources. We believe that sales from Hagensborgs new product lines will add new capital resources over the coming year, but may not be sufficient
to sustain operations and fund new product launches throughout the fiscal year ending June 30, 2006. If we are to pursue the options in mining interests granted to Garuda Gold and Garuda Minerals, we will need to invest approximately $500,000
during the next year in the mining properties subject to those interests.

---

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 ending June 30, 2006.

During the six months ended December 31, 2005, our current assets decreased $31,749 from $679,831 in June 2005 to $648,082 in December 2005. Our inventory and accounts receivable increased $166,316 and our marketable securities
decreased $271,588.

Non-current assets for the six months ended December 31, 2005 were $207,986, net of accumulated depreciation, compared to non-current assets of $219,833 for the six months ended December 31, 2004.

Total liabilities increased from $1,164,971 as of June 30, 2005 to $1,409,285 as of December 31, 2005. This amount includes $1,395,040 in current liabilities, of which $155,000 is a bank loan.

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

Our Chief Executive Officer and our 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 have 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 over financial reporting 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

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

On August 11, 2005, Fadelle Ventures Ltd. delivered notice to the Company to convert $100,000 of a Convertible Note entered into with the Company on June 30, 2004 into units

---

at an exercise price of $0.10 per unit. Consequently, on August
11, 2005, the Company issued 1,000,000 units to Fadelle Ventures Ltd. Each unit
consisted of the following:

| | a. | One share of common stock in the Company; and                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | One warrant to acquire an additional share of the Company
        at $0.20 for every two units issued upon conversion, each warrant expiring
        on June 30, 2007.

On August 24, 2005, the Company issued 175,000 shares and
87,500 warrants pursuant to private placements at $0.10 per unit. 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

On December 6, 2005, the Company issued 609,164 common shares
with a price of $0.10 per share to one of the shareholders for the consideration
of interest owed to the shareholder up to September 30, 2005.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES:

None

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

None

ITEM 5. OTHER INFORMATION:

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

Exhibits

|10.1 | Design Agreement between Hagensborg
        and Turner Duckworth dated March 16, 2005 (incorporated by reference as
        exhibit 10.1 to our Quarterly Report on Form 10-QSB filed on May 12, 2005)               
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                      
|10.2 | Agreement between Garuda Minerals, Newhaven
        and Aquarian dated May 18, 2005 (incorporated by reference as exhibit
        10.1 to our Report on Form 8-K filed on May 25, 2005)                              
|     |                                                                                                                                                                                                                      
|10.3 | Agreement between Garuda Gold, Newhaven
        and Aquarian dated May 18, 2005 (incorporated by reference as exhibit
        10.2 to our Report on Form 8-K filed on May 25, 2005)                                  
|     |                                                                                                                                                                                                                      
|10.4 | Agreement between Garuda and Newhaven
        dated May 6, 2005 (incorporated by reference as exhibit 10.3 to our Report
        on Form 8-K filed on May 25, 2005)                                                  
|     |                                                                                                                                                                                                                      
|10.5 | Environmental Permit for Mineral Exploration
        dated April 20, 2005 (incorporated by reference as Exhibit 10.5 to our
        Annual Report on Form 10-KSB filed on November 14, 2005)                         
|     |                                                                                                                                                                                                                      
|10.6 | Proposed Work Program for Chromium Prospecting
        in Ghana (incorporated by reference as Exhibit 10.6 to our Annual Report
        on Form 10-KSB filed on November 14, 2005)                                   
|     |                                                                                                                                                                                                                      
|10.7 | Agreement for Mining Services between
        Robert Appiah and Newhaven dated May 6, 2005 (incorporated by reference
        as Exhibit 10.7 to our Annual Report on Form 10-KSB filed on November
        14, 2005)

---

|21 | Subsidiaries of the Registrant
|-- | ------------------------------

| | Name                        | Place of Incorporation
| | --------------------------- | ----------------------
| |                             |                       
| | Hagensborg Foods Ltd.       | British Columbia      
| | Hagensborg Seafoods Ltd.    | British Columbia      
| | Natural Program Inc.        | Nevada                
| | Natural Program Ltd.        | British Columbia      
| | Garuda Ventures Canada Inc. | British Columbia      
| | Garuda Gold Corporation     | British Columbia      
| | Garuda Minerals Inc.        | Nevada                

|31.1 | Rule 13a-14(a)/15d-14(a)
        Certification of CEO and CFO
|---- | -------------------------------------------------------------
|     |                                                              
|32.1 | Section 906
        Certification of CEO and CFO             

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: February 14, 2006

GARUDA CAPITAL CORP. 
  (Issuer)

By: /s/C. Robin Relph

C. Robin Relph, President, Chief Executive Officer, Chief Financial
  Officer 
  (Principal Financial and Accounting Officer)

---