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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-KSB/A

Amendment #1

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

FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Commission file number 0-30927

GARUDA CAPITAL
CORPORATION(Name of small business issuer 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, Canada         | V6K 4S1                             
|(Address of principal executive offices)                            | (Zip Code)                          

Issuer's telephone number(604)
675-7643

Securities registered under Section 12(b) of the Exchange Act:
none

Securities registered under Section 12(g) of the Exchange
Act:COMMON(Title of class)

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 required
  to file such reports), and (2) has been 
  subject to such filing requirements for the past 90 days.  x 
  Yes     o No

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained in this 
  form, and no disclosure will be contained, to the best of registrant's knowledge,
  in definitive proxy or information 
  statements incorporated by reference in Part III of this Form 10-KSB or any
  amendment to this Form 10-KSB. x

State issuer's revenues for its most recent fiscal year.
$2,065,888.

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked price of such
common equity, as of a specified date within the past 60 days. (See
definition of affiliate in Rule 12b-2 of the Exchange Act.):637,358,
September 30, 2003

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date. 6,373,575
common shares.

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PART I

Item 1. Description of Business.

We, Garuda Capital Corp, formerly Vanstar Films, Inc., were
incorporated under the laws of the State of Nevada on July 8, 1997. We became a
reporting issuer on the NASD OTCBB in June 2000. In February 2002 there was a
20:1 reverse split of the outstanding common stock and we changed our name to
Garuda Capital Corp.

Vanstar Films was organized to establish itself in the film
industry. These efforts were abandoned in September 2001. In April 2002, Garuda
acquired Hagensborg Foods Ltd., a Vancouver-based manufacturer and marketer of
fine chocolates and other gourmet foods and Natural Program Inc., a manufacturer
and distributor of natural medicine.

We acquired Hagensborg Foods Ltd. for consideration of
US$700,000 cash for all its outstanding share capital to be allocated as
follows: $600,000 for all outstanding common shares, $100,000 for all
outstanding preferred shares. Natural Program Inc. was acquired for
consideration of 500,000 common shares of Garuda Capital Corp.

On April 19, 2002, our subsidiary Hagensborg Foods Ltd.
acquired certain assets of Hagensborg Food Corp., hereafter referred to as HFC,
a company domiciled in the U.S. that is in the business of selling, marketing
and distributing food products. The assets were acquired excluding the cash and
accounts receivable, for $1,000,000. HFC shares certain common shareholders and
directors with us and is therefore considered to be a related party for
accounting purposes. Related party transactions are usually measured at the
transferors carrying amount in the absence of independent verification.
Carrying amounts are defined as the cost amount on the accounts of the
transferor after adjusting for any amortization or impairment in value.
Accordingly we recorded the acquisition at HFCs carrying value of $232,679,
$104,972 in goodwill and $127,707 in inventory. The difference between the
carrying amount and the agreed exchange amount of $767,321 has been charged to
deficit as a shareholder distribution in 2002.

Garudas objective is to develop these two businesses by
providing missing key ingredients such as management expertise, strategic
planning, fund raising capabilities, and an extensive network of international
contacts.

History and general development of business of Hagensborg
Foods Ltd.

Hagensborg Foods Ltd. was incorporated in the Province of
British Columbia, Canada in May 1996 under the name Celestial Chocolates. It
changed its name to Hagensborg Foods Limited in 1998.

We through our subsidiary, Hagensborg are in the business of
manufacturing and marketing of gourmet chocolates and other gourmet foods. We
serve wholesale and retails customers both in Canada and the US. All products
are directly shipped from our warehouse in South Granville, British
Columbia.

2

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Products of Hagensborg Food Ltd.

We manufacture and market both branded and private label
chocolates. The four main Hagensborg chocolate brands are Kiss Me truffle
frogs, Mountain Ridge, Leone and Truffles To Go.

Kiss Me® is a European chocolate truffle in the shape of a frog
with a melting truffle center. The product is marketed in a gift box
presentation containing 12 individual chocolate frogs . The target market for
Kiss Me truffles consists of upscale gift box chocolate consumers, both male and
female between 25 and 54 years of age with medium to higher household
incomes.

Mountain Ridge® is a Belgian honey almond nougat bar consisting
of chocolate peaks with white chocolate tips. The product is marketed in 2
sizes, a king sized 300 gram bar and a snack sized 75 gram bar. National chains
such as Seven Eleven in Canada have approved the product for national
distribution in their stores.

Leone® is a high end gift box confection. The Classic
Collection, the first item of this line, contains milk, dark and white
champagne truffles made of Belgian chocolate and is sold in various gift boxes
as well as a keep sake tin. The product was launched at the Fancy Food Show in
New York in June 2003.

Truffles To Go® are manufactured in 8 flavors, Cappuccino,
Orange, Mint, Mocha, Peanut Butter, Milk Chocolate, and Chocolate Eclipse.
Truffles To Go® are marketed in two different size packages, a single serve pack
with 2.5 oz and a sharing pack with 5.4 oz. In addition several all natural
and no sugar added versions are manufactured. The target market of this
product is the indulgent chocolate consumer: Typically women between 25 and 44
years of age in the mid to higher household income bracket.

By an agreement dated April 19, 2002 and described above, We,
through our subsidiary, Hagensborg Foods Ltd. acquired a line of seafood
products including seafood pates and smoked salmon filets from Hagensborg Food
Corporation. Hagensborg Food Corporation is a company domiciled in the U.S. that
is in the business of selling, marketing and distributing food products.
Hagensborg Food Corporation shares certain common shareholders and directors
with us and is therefore considered to be a related party.

Hagensborg seafood pâtés are marketed in 6 flavors, namely
smoked salmon, Salmon, shrimp, rainbow trout with dill, crab and lobster. The
products are packed in 3-oz tins and are sold either individually or inside a
decorative retail box. We own the proprietary recipe and the custom German food
processor, being utilized to produce the pâté. This equipment is installed at
St. Jeans, a plant in Nanaimo, BC, which produces the pâté on a contract basis
for us.

Market

Gourmet foods consumption is affected by many factors,
including climate, purchasers disposable income, the economic development of
the country and its distribution and marketing facilities. The developed nations
generally have high levels of gourmet foods consumption in comparison to the
developing or emerging nations.

The following are some highlights on chocolate consumption,
tastes and buying habits:

3

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An AWMA (American Wholesale Marketers Association) State of the
Industry Report found that in the US, the heavy buyers of confectionery are
adults in the 35-54 age group with children. Chocolate buyers are 59% more
likely to have five or more people in the household. Chocolate and non-chocolate
candy households are likely to be headed by a craftsman or technical worker than
a white collar manager. Across all confectionery segments consumption is
relatively higher among Black and Hispanic households.

A Datamonitor report shows that US consumers are increasingly
moving away from chocolate to low fat and low sugar products. The chocolate
industry in the US has only recently begun to introduce low fat products.

A Taylor Nelson AGB survey of 4350 people in the UK found that
16 to 24 year olds account for 22% of the volume sales of chocolate, and that
males account for 53% of these sales. Chocolate was the clear leader in the
impulse buying market with sales of £2594 million.

According to an industry survey 53% of Canadians use chocolate
as a personal reward. A third also uses candy and other sweets to reward their
loved ones.

Lawrence Graham, President of the Chocolate Manufacturers
Association - National Confectioners Association, said that in the United States
nine out of ten Americans eat candy. Per capita consumption of candy is over 26
lbs. per person per year, and the USA ranks 11th in the world for per capita
consumption. Per capita chocolate consumption was 11.7 lbs. per person. Children
aged 5-9 influence 40-45% of candy sales and teenagers have the highest per
capita consumption. Eighty to eighty-five percent of candy is bought on impulse
and 35% of all candy is sold during the seasonal holidays.

Chocolate consumption during key holidays account for 35
percent of all confectionery sold during the year, according to the US National
Confectioners Association.

Halloween is the top candy holiday with $1.802 billion in
sales.

More than 60 million chocolate bunnies and other chocolate
products are produced annually for Easter, accounting for $1.672 million.

During the Christmas/Hanukkah Season consumers spend more than
$1.446 million on chocolate.

Americans spend $1,105 million each Valentine's Day on
chocolate, making it the fourth biggest holiday of the year for confectionery
purchases.

Competition

Our Hagensborg subsidiary can be considered a niche marketer of
specialty food products. Our competition consists of Canadian and US-based
manufacturers and marketers of gourmet confectionary products and canned seafood
pates. Competition is based upon name recognition, taste and cost. Most of the
competition is larger than we are with greater market share and resources.

4

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Marketing

Marketing Trends

Three main trends currently influence the general marketing of
specialty foods:

Increasingly health conscious shoppers look for high
quality, health-friendly products:This trend is largely a
response to the general increase in health consciousness of both the aging
baby-boomers and their descendants. Hagensborgs no-sugar added, all natural
chocolates and all natural seafood pates are marketed to this growing
segment.

Upscale packaging makes higher prices
acceptable:An unprecedented array of creative, unique, and
upscale packaging options is helping consumers swallow the higher cost of
gourmet products. Packaging helps to draw the consumer who is not familiar with
the quality of the product, as well as the consumer shopping for a pre-wrapped
gift. Hagensborg is currently updating its packaging to reflect the demand for
high-end designs and custom decorations for different seasons.

Small packages encourage impulse
offerings:Specialty foods marketers are making their products
easier to purchase by selling them individually wrapped, or in small packages
suitable for placement at the register. To this end, Hagensborg is developing
3-piece truffle packages and other impulse offerings.

Marketing Activities

Our main Hagensborg promotional activities are:

Trade Shows:Trade shows are a key forum for meetings
with brokers, retail buyers and distributors. We are represented at three Fancy
Food Shows: January in San Francisco; March in Chicago; July in New York. Other
trade shows attended are: the All Candy Expo in June in Chicago; the Natural
Products Show in March in Chicago; and the Private Label Manufacturers
Association Private Label Show in November. In addition, we attend distributor
shows such as the Gourmet Award show for their customers held during summer.

Trade Advertising:We regularly place Hagensborg ads
in key trade press publications including Gourmet Retailer and Gourmet News.

Press Releases:We distribute press releases to trade
publications and has achieved coverage in Fancy Food Magazine, Gourmet Business,
Confectioner Magazine and Gourmet Retailer.

Sales Manager Contacts:Our Sales Managers have been
developing contacts with distributors, brokers and major retailers such as
Safeway, Albertsons and Kroger. Our Sales Managers work with the retailers to
place products in their permanent displays, provide promotional support and
ensure supply. To widen distribution of Hagensborg products through the larger
retailers means gaining head office approval then working with each regional
division to gain placement in stores.

5

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Product Information:Our Marketing has developed
selling presentations for each product/brand, including market information and
key selling points. As well as using it for customer meetings, Sales provides
this information to brokers who work on our behalf to ensure they have a strong
selling story. This is part of the Sales effort to ensure our brokers and
distributors are educated about our products and will therefore do a better job
with potential customers. Retailers are inundated with new products to choose
from. Providing competitive arguments in a category context makes it easier for
them to choose Hagensborg products.

Website:The Hagensborg website address
www.hagensborg.com appears on packaging and printed materials. The site gives
details of all products with information for consumers, retailers and
distributors. This is a useful tool for reaching smaller customers.

Growth Strategies

Market Penetration

Increasing the sales volume of existing products in existing
markets through focusing on marketing and promotional activities is a low risk
strategy to grow our Hagensborg business. However, since this strategy has its
limitations such as individual distribution channels can only support a certain
sales volume, additional methods have to be adopted.

In order to further penetrate its existing markets, We are
focusing on our core competency, the production of high quality truffles. We are
currently developing new packaging concepts for our truffles to be able to offer
products tailored to specific seasons. For example, the spring season which
includes Valentines Day, Easter and Mothers Day is the second most important
chocolate consumption season after Christmas.

Market Expansion

Broadening the distribution base, that is, finding new markets
for existing products, is another strategy we plan to apply in order to expand
our business. Although it involves more risk than sole market penetration,
developing new markets also has a greater potential for revenue generation.

We are currently developing a variety of concepts to attract
new markets for its existing products. One approach is to repackage our high end
truffles to appeal to consumers with higher levels of price sensitivity. We are
also pursuing a variety of private label opportunities to add to its bottom line
by manufacturing for large national retail chains such as Safeway.

Product Development

New products are widely acknowledged by industry leaders as
being the lifeblood of the specialty food market. In the past, we have been very
successful in launching new products, including our latest introduction Kiss
Me chocolates. The main focus of the product

6

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development efforts will be placed on finding products to
generate revenue in the historically revenue weak first and second calendar
quarters. Recent successful product launches include Mountain Ridge and
Leone.

Product/Market Development

The development of new products for new markets is the most
cost-intensive, high risk method for growing within the specialty food industry.
However, the risk can be minimized by acquiring existing businesses with
products complementary to the Hagensborg line of products. The advantage of
acquiring existing companies with established products lies in development cost
savings and the reduced time to market.

Other Projects

In addition to the product/market-related strategies discussed
above we are currently evaluating new manufacturing equipment to decrease its
cost of production and thereby be able to offer competitive pricing.

Stated Business Objectives

Hagensborgs major objectives are threefold:

Expand product line  Short-term:Our
strategic focus is on developing and marketing its existing proprietary brands
and private label business in Canada and the US as well as expanding its product
range through in-house product development and acquisitions of suitable gourmet
foods manufacturers. The key focus will be placed on identifying new products to
balance the current third and fourth quarter business and to add products which
will generate revenue in the first and second quarters.

Expand distribution to increase volumes 
Medium-term:In order to take advantage of economies of scale
we are seeking to expand our national distribution in Canada and the US. This
will be achieved by adding selected distributors and brokers in the areas of
general grocery, department stores and health food chains, by developing sales
channels for the club and private label business and by hiring key sales
personnel.

In the short run, first priority will be given to the expansion
of distribution. To sustain growth over the longer term, We intend to generate a
continuing flow of distinctively different, new products through in-house
product development and by way of acquisitions and market these new products on
a North America wide basis.

Establish production facility 
Long-term:Our current Hagensborg manufacturing and warehouse
facilities are leased and the lease agreement will expire in March 31, 2004. The
Company is looking to extend the current lease.

7

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History and general development of business of Natural
Program Inc.

Natural Program Inc. is a Nevada corporation which we acquired
in April 2002. In January 2002, Natural Program Inc. acquired Natural Program
Ltd., a British Columbia company which founded the business.

Through our subsidiary, Natural Program, Inc., we are in the
business of developing and marketing herbal remedies. Through Natural Program we
operate a Chinese herbal pharmacy to dispense high quality Chinese herbs to
practitioners and market a whole-sale line of herbal remedies under the Natural
Program name. To date, we have completed the development of the first complete
product line which is being test marketed in Vancouver-based health food stores
and pharmacies.

Our main Natural Program assets are our proprietary
formulations which are developed in-house. Raw materials are sourced
internationally to ensure the highest possible quality. Large-scale
manufacturing is currently outsourced to specialized providers who comply with
Good Manufacturing Practices standards. Our Natural Program products are
marketed in the US, Canada and Europe.

Products and services of Natural Program Inc.

Currently, our main Natural Program product line consists of
five liquid herbal remedies which we believe improve the quality of day-to-day
life, offering solutions for common health problems. No independent studies have
been performed to evaluate the effectiveness of the formulations. The formulas
are sold in 2 oz./59.1ml bottles and retail for approximately CDN$20.

Stress Rescue.- Designed to offer immediate relief of
stress, trauma, and shock, this formula can be used in times of emergency, as a
restorative tonic, or as a preventative measure. We believe Stress Rescue helps
the body adapt to increased demands, and is particularly useful in preventing
anxiety attacks, relieving fatigue and easing tension and pain.

Energy Rescue.- A caffeine-free herbal formulation used
to increase endurance, improve athletic performance, restore sexual vitality and
invigorate the body and mind. Energy Rescue can also be used to alleviate the
effects of jet lag, nervous exhaustion, Chronic Fatigue Syndrome and is designed
to help restore the body in cases of depression and physical weakness.

Sleep Rescue.- A sedative and relaxing nervine blend,
this powerful formula is designed to promote a deep, relaxing and revitalizing
sleep. We believe Sleep Rescue reduces evening restlessness, restores the
nervous system and relieves anxiety, tension and sleeplessness without habit
forming or addictive properties.

Headache Rescue.- This formula alleviates headaches and
migraines caused by various factors through its anti-inflammatory and pain
relieving properties. We believe Headache Rescue helps to relax muscular
tension, promotes rapid recovery, and is effectively used as a preventative
measure.

Memory Rescue. - Formulated to enhance memory and
concentration, Memory Rescue supports cognitive function, increases mental
abilities, and counteracts mental dullness and depression.

8

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Thrombosin is a herbal formula which we believe helps
prevent the formation of blood clots as a result of lack of circulation. The
formation of blood clots, or deep-vein thrombosis or DVT, has been dubbed
economy class syndrome because it results from long hours of minimal movement
suffered especially but not exclusively by air travel passengers on long-haul
flights. Taken several days before and after flying Thrombosin helps the
prevention of blood clots which can be fatal if not treated properly.

DVT is the fourth-leading cause of death in the United States.
Source: CNN.com; Snacking, moving can decrease risk of flight-related blood
clots, 11/21/2000.

In a review of over 80 international medical references of DTV
and Economy Class Syndrome there are at least 10 studies that demonstrate a
direct link between air travel and blood clots. Several are specially worth
noting:

An international study of 100 air passengers showed that one in
10 developed a blood clot as a result of flying. Source: PA News: Medicine -
Economy class risks 'greater than expected', 11/18/00 .

A study at Ashford Hospital which is a 10-minute drive from
London's Heathrow Airport identified 30 deaths in three years from deep-vein
thrombosis arising from air travel. The hospital claims that at Heathrow alone,
at least one passenger a month dies from a blood clot. Source: Travel-news.org:
Cabin attendant suffers deep vein thrombosis, 01/15/2001 and Tom Bogdanowicz,
Doctors, airlines warn of blood clot risk, CNNfn, 01/11/2001.

Farrol Khan, director of the British Aviation Health Institute
estimates that as many as 6,000 passengers a year may die as a result of DVT,
with as little as three hours of cramped conditions. Source: Patrick Wintour,
Jamie Wilson: Dangers lurking on long-haul flights, The Guardian,
10/24/2000.

In U.S. research program it was demonstrated that 50% of
passengers suffering blood clotting had traveled recently in the air for 4 hours
or more. The symptoms usually appeared within 4 days of flying and 35% of people
had no predisposition to the condition. Source: Emma Ross: Are Long Flights
Really Dangerous? The Associated Press, 01/12/2001.

A French study has shown that journeys more than five hours
long by car, plane or train increase the risk of DVT fourfold. Source: BC News:
Deep vein thrombosis, 10/23/2000 CNN.com: Woman dies from blood clot after
long-haul flight, 10/23/2000.

A study by Norwegian researchers published in the medical
journal The Lancet found that the pressurized atmosphere of airplanes may
increase the risk of venous thrombosis. The researchers found that levels of
compounds associated with blood clotting increased between two and eightfold in
the research participants during the eight hours. Source: BBC News: Report
backs blood clot flight link, 11/10/2000 And Bentz et al: Association between
acute hypobaric hypoxia and activation of coagulation in human beings, The
Lancet, Volume 356, Number 9242, 11/11/2000.

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Herbal Laboratories

In addition to the wholesale product lines described above, Our
Natural Program Herbal Laboratories specializes in dispensing Chinese herbal
extracts including traditional Chinese herbal formulas, custom herbal formulas
and single herbal extracts in granulated form. Doctors of traditional Chinese
medicine prescribe herbal formulas just like traditional physicians prescribe
medications. Patients drop off their prescriptions at the Natural Program
laboratory where the formulations are mixed by professional herbalists. As an
incentive for practitioners to refer their patients to Natural Program they
receive a commission based on the value of herbs sold.

We carry over 400 single Chinese herbal extracts and more than
350 of the most commonly used formulas. Both are packed in 50g and 100g bottles
and may be special ordered in larger quantities.

Market

The total size of the global herbal remedy market is estimated
to be US $30 billion with an annual growth rate of 10 percent according to the
Chinese State Drug Administration. The market is currently dominated by
traditional, grass-roots products sold as raw herbs which require preparation
such as drying or boiling. The market is underserved by professional products
which are safe, easy to use and effective. This is mainly due to the complex
regulatory environment and the start-up capital requirements for developing and
dispensing herbal remedies.

Target Market

Our Natural Program remedies are targeted at the general public
and intended as part of everybodys home pharmacy. They are typically used by
environmentally conscious, socially responsible, family-oriented and educated
shoppers who:

Already use natural medicine and look for natural, non-habit
  forming remedies to common health problems; 
  or 
  Are first-time users of natural medicine who look for effective, easy-to-use
  starter products to familiarize themselves with the benefits of
  natural remedies.

Market Acceptance

Market acceptance of our Natural Program products is based on
that fact that people in today's health-conscious marketplace prefer to prevent
and treat illness with natural remedies as part of a holistic approach to health
and well-being instead of taking chemically prepared medications with unwanted
side effects. A recent study by Stanford University shows that 70% of the
population in the US used some form of alternative medicine in the past year
with herbal remedies being one of the fastest growing market segments.

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Competition

As a manufacturer and wholesaler of herbal remedies, our
Natural Program competes with manufacturers of natural medicine products. Other
competition includes allopathic pharmaceutical drug companies and natural
therapists who supply professional lines of natural health products.

Most competitors can be categorized in the following three
groups:

Small to medium sized Chinese herbal dispensaries who fill custom
  formula prescriptions through direct sales and over the Internet.
  Medium sized manufacturers of Western herbal remedies, minerals, vitamins, etc.
  
  Large pharmaceutical drug companies who offer natural remedies in addition to
  traditional drugs.

Our focus is to capture the segments of the markets which do
not buy from large corporations but prefer smaller, specialized providers.

Marketing plans and strategies

Distribution

Our Natural Program products are currently distributed through
direct sales to natural health food store and pharmacies on a test market basis
in Vancouver. To expand its distribution to the rest of Canada, the US and
Europe and to include general grocery and mass food chains Natural Program is
identifying specialized distributors for each of its geographical markets.

Promotion

In order to support retail sales, we provide extensive product
information and educational seminars to sales personnel in order to enable them
to effectively sell its products. We also provide point of purchase displays and
informational brochures for end-consumers. In the future, we intend to advertise
in trade publications and attend industry trade shows.

Stated business objectives

Our major objectives for Natural Program are threefold:

Expand product line  short-term:Our
strategic focus is on developing and marketing our existing products in Canada,
the US and Europe as well as expanding our product range through in-house
product development.

Expand distribution to increase volumes  short- to
medium-term:In order to take advantage of economies of scale we are
seeking to expand our national distribution in Canada, the US and Europe. This
will be achieved by identifying suitable distribution partners and adding
selected distributors in the areas of natural pharmacies, health food chains and
general grocery. In addition, we intend to hire key sales personnel in each of
our main geographical target markets.

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Establish production facility  long-term:We
currently outsource the manufacturing of our Natural Program products to
specialized providers. In the long-term, we are looking to establish our own
production facilities by way of acquiring selected suppliers.

Employees:Our employees are engaged as follows:

Administration/ Accounting
    Sales/ Marketing
    Production/ Operations
    TotalGaruda Capital Corp.
    2
    -
    -
    2Hagensborg Foods Ltd.
    3
    2
    6
    11Natural Program Inc.
    2
    -
    2
    4


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Item 2. Description of Property.

Our properties are as follows:

Lease Details
    Location
    Sq Footage
    Monthly lease
    Leasor
    ExpiryHagensborg Foods
    1576 Rand Avenue, Vancouver, BC
      V6P 3G2, Canada
    12,000
    C $16,000 or US
      $10,300
    Granville South Business Centre
      Holdings Ltd. C/O Maple Leaf Property Management Third Floor,
      100 Park Royal West Vancouver, BC V7T 1A2
    March 31, 2004Natural Program
    102  2245 West Broadway,
      Vancouver, BC V6K 2E4, Canada
    800
    C$ 1,400.00 US
      $903.00
    Oaktree Management
      23575-124th Avenue, Maple Ridge, BC. V2X 4K3
    March 31,
      2004Garuda Capital
    502  1978 Vine Street,
      Vancouver, BC V6K 4S1
    The Companys head office
      is currently located in the private residence of C. Robin Relph, President
      of Garuda Capital Corp. No consideration is being paid to Mr. Relph. A
      commercial office space will be leased in due course as
      needed.


Item 3. Legal Proceedings.The Company is not involved
in any legal proceedings as of the date of the filing of this annual.
report.

Item 4. Submission of Matters to a Vote of Security Holders.
:No matters were submitted to the a vote of the securities holders during
the fourth quarter of the fiscal year ended June 30, 2003.

13

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PART II

Item 5. Market for Common Equity and Related Stockholder
Matters.

The Company's common stock is listed for sale on the NASD OTC
Bulletin Board and began trading in June 2000. Prior to June 2000 there was no
established market for the Companys common stock.

The following table summarizes trading in the Company's common
stock, as provided by quotations published by the OTC Bulletin Board for the
periods as indicated. The quotations reflect inter-dealer prices without retail
mark-up, markdown or commission, and may not represent actual transactions.

BIDQuarter ended
    High
    Low06/30/03
    0.22
    0.1503/31/03
    0.3
    0.2112/31/02
    0.39
    0.2109/30/02
    1.2
    0.22


As of September 30, 2003 there were 6,373,575 shares of common
stock outstanding and there were approximately 80 holders of the Company's
common stock.

The Company has not declared a dividend during the fiscal year
ended June 30, 2003 and does not anticipate declaring a dividend in its current
fiscal year.

Equity Compensation Plan Information

The Company has a Stock Option Plan, the "Garuda Capital Corp.
2002 Stock Option Plan" (the "Plan"). The Plan provides that the Board shall
exercise its discretion in awarding options under the Plan, not to exceed
2,000,000 shares. The per share option price for the stock subject to each
option shall be as the Board may determine. All options must be granted within
ten years from the effective date of the Plan. There is no express termination
date for the options although the Board may vote to terminate the Plan.

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Plan
      category
    Number of securities to be issued upon exercise of
      outstanding options, warrants and rights
    Weighted average exercise price of outstanding
      options, warrants and rights
    Number of securities remaining available for future
      issuance(a)
    (b)
    (c)Equity
      compensation plans approved by security holders
    0
    
    0Equity
      compensation plans not approved by security holders
    675,000
    $0.30
    1,325,000Total
    675,000
    
    1,325,000


Item 6. Managements Discussion and Analysis of Financial
Condition and Plan of Operation

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., a Vancouver-based manufacturer and marketer of fine chocolates and
other gourmet foods and Natural Program Inc., a manufacturer and distributor of
natural medicine.

Hagensborg Foods Ltd. was acquired for consideration of a total
of US$700,000 cash with $700,000 for all its outstanding share capital.
Subsequent to the acquisition, we paid $420,000 for liquidation of certain
debentures of Hagensborg Foods Ltd. The two debenture holders were Madrona
Investments, an unrelated party, and Hagensborg Limited, a related party as Mr.
Robin Relph, a Director and President of Garuda, is also a shareholder and
Director of Hagensborg Limited.

On April 19, 2002, our subsidiary Hagensborg Foods Ltd.
acquired certain assets of Hagensborg Foods Corp., hereafter HFC, excluding
the cash and accounts receivable, for $1,000,0000. HFC shares certain common
shareholders and directors with the Company and is therefore considered to be a
related party for accounting purposes. Related party transactions are usually
measured at the transferors carrying amount in the absence of independent
verification. Carrying amounts are defined as the cost amount on the accounts of
the transferor after adjusting for any amortization or impairment in value.
Accordingly the Company has recorded the acquisition at HFCs carrying value of
$232,679, $104,972 in goodwill and $127,707 in inventory. The difference between
the carrying amount and the agreed exchange amount of $767,321 has been charged
to deficit as a shareholder distribution in the current period.

15

---

Natural Program Inc. was acquired for consideration of 500,000
common shares of Garuda Capital Corp. Robin Relph and Birgit Schrott are
Directors of Natural Program Inc.

We have incorporated two further subsidiaries, Garuda Ventures
Canada Inc. and Garuda Gold Corporation. Both companies are incorporated under
the laws of British Columbia, Canada. They hold any idle working capital to be
invested in marketable securities. The companies have no other assets.

Results of Operations Fiscal 2003 vs. Fiscal 2002  Garuda
Capital Corp. on Consolidated Basis

We realized total revenues of $ 2,065,888 and the net loss for
the year ended June 30, 2003 was $ 1,370,114.

Liquidity and Capital Resources Fiscal 2003 vs. 2002 
Garuda Capital Corp. on Consolidated Basis

We believe that sales from our new subsidiaries will not
provide sufficient capital resources to sustain operations and fund product
development until fiscal year 2004/2005. While we have received a going
concern opinion from our auditors, we expect to raise capital through the
conversion of outstanding warrants and equity sales including a Rights Offering
to our existing shareholders 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.

Cash flows from financing activities during the year included
the following transactions:

|- | Our current assets include $ 96,644 in Available
      for Sale Securities.
|- | ---------------------------------------------------------------------------
|- | Several loans were made to us by shareholders:                             
|  | -                                                                          
|  | -                                                                          
|  | -                                                                          
|  | -                                                                          
|  | -                                                                          
|  |                                                                            

Future Outlook  Garuda Capital Corp. on Consolidated
Basis

We believe that with the acquisitions of Hagensborg Foods Ltd.
and Natural Program Inc., we successfully transitioned from a dormant entity to
an operational management company. Looking ahead, we believe can grow these two
operations through expanded distribution and new product development in our food
business and the commercial launch of our Natural Program Inc. products in
Western Canada and the Pacific Northwest.

16

---

Discussion and Analysis of Financial Condition and Plan of
Operation for Each Operating Subsidiary

In order to be more informative regarding the results of
operations and the liquidity and capital resources for each of our operating
subsidiaries, the following discussion is separated between Hagensborg Foods
Ltd. and Natural Program Inc.

Results of Operations Fiscal 2003 vs. Fiscal 2002 -
Hagensborg Foods Ltd.

Revenues of $ 1,884,470 in the fiscal year ended June 30, 2003
were 26 % higher than the $ 1,493,727 in revenues reported for the fiscal year
ended June 30, 2002. The increase was due to the acquisition of the assets of
Hagensborg Food Corporation in April 2002, which included a category of seafood
products.

Gross profit for the year ended June 30, 2003 was $ 484,421
versus $ 338,066 in 2002. Gross profit percentage was stable at 22.5 % in 2003
versus 22.6 % in 2002.

Net loss for the year ended June 30, 2003 was $ 477,933 versus
$ 216,545 for the same period in 2002, representing a 120 % increase in net
losses. The increase in net loss is primarily due to a temporary disruption in
our sales efforts caused by a change in our sales personnel and decreased sales
volume due to the overall economic climate.

Our sales and marketing costs consist primarily of personnel
costs, advertising, promotions, and tradeshows. Total costs were $ 310,827 and $
99,671 for the fiscal years ended June 30, 2003 and June 30, 2002 respectively.
The increase of $ 211,156 is largely due to an additional marketing costs
associated with our seafood product line as well as new product development. We
anticipate that sales and marketing costs will begin to grow over the
foreseeable future as we implement our business growth strategies.

Our general and administrative costs consist primarily of
personnel costs, professional and legal costs, consulting fees, and general
office costs. Our general and administrative costs were $ 450,202 and $ 252,091
for the fiscal years ended June 30, 2003 and June 30, 2002, respectively. The
increase in general and administrative costs between the two years is largely
the result of $ 26,024 in interest and bank charges and $ 65,358 in consulting
fees. General and administrative costs as a percentage of revenue increased
between the two periods as a result of increases in expenses over the same
periods. We anticipate that general and administrative costs will remain stable
over the foreseeable future.

Our premise and equipment leases were $ 127,802 and $ 124,091
for the fiscal years ended June 30, 2003 and June 30, 2002, respectively. We
anticipate that our premise lease costs will remain constant. Our lease expires
March 31, 2004.

Our Depreciation costs were $ 43,684 and $ 59,146 for the
fiscal years ended June 30, 2003 and June 30, 2002 respectively. We do not
anticipate that our depreciation costs will change dramatically in the fiscal
2004.

Liquidity and Capital Resources Fiscal 2003 vs. 2002 -
Hagensborg Foods Ltd.

Since inception through April 1, 2002 when Hagensborg Foods
Ltd. was acquired by Garuda Capital Corp., we have financed our operations
partly through revenues for operations and bank

17

---

credit facilities, and partly through the issuance of equity
shares and convertible debentures. We have not been able to operate above the
break-even point since inception and have had to rely on our parent company for
capital resources. We believe that sales from our new product lines will add new
capital resources, but may not be sufficient to sustain operations and fund new
product launches until fiscal 2004/2005.

During the fiscal year ended June 30, 2003, our current assets
  to current liabilities ratio decreased from 1.63 to 0.64. Current assets decreased
  $187,499 from $566,925 to $379,426. This was primarily due to lower accounts
  receivable as a result of lower sales and improved inventory management practices
  including lower levels of packaging and finished goods inventories. Non-current
  assets decreased from $1,063,350 to $282,422 due to a write-off of goodwill
  of Hagensborg Foods Ltd.

We have reorganized our banking relationship and secured a
$250,000 operating line of credit and a $200,000 long-term loan . As at June 30,
2003 the outstanding principal on the bank loan was $169,400 and the operating
line was at $263,479. We have also received loans in the total amount of
$425,861 from our parent company, Garuda Capital Corp.

Future Outlook - Hagensborg Foods Ltd.

In order to achieve an increase in sales and to operate above a
break-even point we have focused part of our efforts to develop new
confectionary products that we can sell through the seasonal periods such as
Christmas, Valentines Day, Easter, and Mothers Day. The company has
traditionally lacked seasonal items focused on Valentines and Easter which has
resulted in low sales during these periods. We have also focused part of our
efforts to develop new confectionary products that we can sell throughout the
year as an everyday item to help develop a constant stream of sales on a month
to month basis. New product developments include Leone, a high end gift box
chocolate and Mountain Ridge, a Belgian chocolate bar.

We are currently employing one in house sales manager and we
are using regional brokers throughout North America to make presentations on our
behalf to various customers in their local regions, and plan to increase our
usage of brokers who have developed relationships with key buyers in their
regions.

Our plans are to target several different market channels
including Club Stores such a Costco, Sams, and BJs which can provide a
substantial volume on a seasonal basis. Other channels that we will pursue
include food distributors, grocery stores, specialty stores, gift basket
distributors, convenience stores, drug stores, and department stores, book
stores, and floral shops.

Part of our focus will also include efforts to develop
additional private label and co-packing business. We will be attending several
tradeshows in the upcoming fiscal year including the Fancy Food Show, All Candy
Expo, and several regional gift shows to help develop brand recognition and
distribution of our products.

The confection business is seasonal and we find that during
certain months of the year our liquidity is strained. We believe that through
the addition of our new products, and hiring strong sales personnel to sell our
existing products that we can obtain stronger year round sales. Through the sale
of our seafood product line, we expect to improve our liquidity by offsetting
the seasonality of the confection business.

18

---

Results of Operations Fiscal 2003 vs. Fiscal 2002 - Natural
Program Inc.

Natural Program Inc. realized revenues totaling $ 139,106 in
fiscal 2003. Gross profit for the year ended June 2003 was $ 15,759. Gross
profit percentage was 11 %. Net loss for the year ended June 2003 was $
69,216.

Currently, our sales consist mostly of Chinese herbal
formulations to practitioners of traditional Chinese medicine on a wholesale
basis. We sell the herbs to practitioners for a wholesale price and they in turn
retail them to their patients with a mark-up (usually 100%). We collect the
difference for the practitioners and balance their accounts at the end of every
month. We have introduced a 15% price increase for our Chinese herbs in April
2003 to adjust to price increases from our suppliers. In addition, we have
introduced a dispensing fee for custom formulations to account for the labor
intensiveness of the customization.

In addition to our range of Chinese herbs, we are in the
process of test marketing a line of Western herbal remedies in the Vancouver
market. As we implement our marketing plan for this product category in Western
Canada, the Pacific North West and subsequently the rest of Canada and the US we
expect sales to increase over the coming year. Our newly redesigned website
www.naturalprogram.com will be an important tool to market both our product
lines.

Our general and administrative costs consist primarily of
professional and legal costs, consulting fees, rent and general office costs.
General and administrative expenses increased from $15,096 in fiscal 2002 to
$65,846 in fiscal 2003. As part of general and administrative expenses,
consulting fees increased from $ 7,419 in fiscal 2002 to $ 20,229 in fiscal 2003
or 173 %. This increase in mainly due to the necessity for new product
formulations, marketing development and outsourced management and accounting
expenses as a result of the growth of our operations. In the future, as we
implement our growth plans, we anticipate to hire commission sales people which
will not affect our consulting expenses. We do not anticipate our consulting
expenses to increase significantly over the next year.

Rent increased marginally to $11,585 in 2003 versus $ 10,664 in
2002. As we implement our business growth strategies we anticipate to rent a
warehouse facility to handle and store additional inventory. Professional fees
associated with legal fees for trademark development decreased slightly between
2002 at $ 1,945 and 2003 at $1,192.

We anticipate to incur sales and marketing costs, including
hiring a sales person, broker fees and tradeshow attendance fees as we implement
our business growth strategies.

Liquidity and Capital Resources Fiscal 2003 vs. 2002 -
Natural Program Inc.

Since inception through April 1, 2002 when Natural Program Inc.
was acquired by Garuda Capital Corp. we have financed our operations partly
through revenues and bank credit facilities, and partly through the issuance of
equity shares. We are not yet able to operate above the break-even point and
have to rely on our parent company for capital resources. We believe that
additional sales resulting from our increased marketing efforts will add new
capital resources, but may not be sufficient to sustain operations and fund new
product launches until fiscal 2004/2005.

19

---

During the fiscal year ended June 30, 2003, our current assets
to liabilities ratio increased from 0.85 to 0.97. Current assets increased
slightly from $ 30,420 to $ 31,744. Noncurrent assets decreased from $ 25,401 to
$ 20,241 net of depreciation during the fiscal year. The decrease is primarily
due to the sale of the company vehicle.

Total liabilities increased from $ 61,132 in fiscal 2002 to $
121,507 in fiscal 2003. This includes $ 27,946 in current liabilities and
$101,569 in long-term debt. Long-term debt includes a $96,674 loan from our
parent company, Garuda Capital Corp. We sold our company vehicle generating a
loss of $ 2,301. The bank loan of $ 4,648 as at June 30, 2002 associated with
the lease of the company vehicle was subsequently eliminated.

Financing activities for the current year included a $ 88,195
loan from our parent company, Garuda Capital Corp.

Future Outlook - Natural Program Inc.

In order to achieve an increase in sales, reach critical mass
and to operate above a break-even point we will focus our efforts to expand the
geographical reach of our sales and thereby increase volume.

We are planning to hire a sales person before the end of the
calendar year 2003 to sell our products in Western Canada, the Pacific Northwest
and subsequently the rest of Canada and the US. We will encourage practitioners
who are not in close proximity of our Vancouver laboratory to buy in higher
quantities from us which will enable us to increase our margins as a result of
shipping and handling costs.

We are currently only using a direct sales approach which
limits our reach, both in terms of the number of target customers we can present
our products to as well as geographically. We plan to engage regional brokers
who have developed relationships with key buyers in their regions.

Our plans are to target several different market channels
including health food stores, natural pharmacies, traditional pharmacies, drug
stores and grocery stores. We will be attending several tradeshows in the
upcoming fiscal year to achieve awareness of our products in the market
place.

In addition, we will focus our marketing efforts on schools of
traditional Chinese medicine. We sponsor courses which students of traditional
Chinese medicine are required to take as part of their training and instructors
are encouraged to introduce our products to their students. Students get to know
our brands while they are still in training and continue to use our products
after graduation when they open their own clinics.

With the purchase of our encapsulation machine in the fourth
quarter of 2002 we are now able to attract a broader audience of patients. We
sell our Chinese herbs in powder form because of their higher potency in
comparison in liquid extracts. However, powders tend to be bitter tasting and
make intake for frequent travelers difficult. Capsules are virtually taste free
and convenient to take anywhere. Encapsulation is considered a premium service
in the marketplace and we are expecting to expand our sales to more
discriminatory shoppers.

20

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Item 7. Financial Statements.









CONSOLIDATED FINANCIAL STATEMENTS

GARUDA CAPITAL CORP.

VANCOUVER, BRITISH COLUMBIA, CANADA

JUNE 30, 2003 AND 2002





| | 1. | INDEPENDENT AUDITORS' REPORT                                    
| | -- | ----------------------------------------------------------------
| |    |                                                                 
| | 2. | CONSOLIDATED BALANCE SHEETS                                     
| |    |                                                                 
| | 3. | CONSOLIDATED STATEMENTS OF OPERATIONS                           
| |    |                                                                 
| | 4. | CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
      EQUITY
| |    |                                                                 
| | 5. | CONSOLIDATED STATEMENTS OF CASH FLOWS                           
| |    |                                                                 
| | 6. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                      

21

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors of Garuda Capital Corp.

We have audited the accompanying consolidated balance sheets
  of Garuda Capital Corp. as of June 30, 2003 and 2002 and the consolidated statements
  of operations, changes in stockholders' equity and cash flows for the years
  then ended. These consolidated financial statements are the responsibility of
  the Company's management. Our responsibility is to express an opinion on these
  consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  Garuda Capital Corp. as of June 30, 2003 and 2002, and the results of its operations
  and its cash flows for the years then ended in conformity with accounting principles
  generally accepted in the United States of America.

The accompanying consolidated financial statements have been
  prepared assuming that the Company will continue as a going concern. As discussed
  in Note 1 to the consolidated financial statements, the Company has suffered
  recurring losses from operations and has a large deficit that raise substantial
  doubt about its ability to continue as a going concern. Managements plans
  in regards to these matters are also described in Note 1. These consolidated
  financial statements do not include any adjustments that might result from the
  outcome of this uncertainty.

As discussed in Notes 2 and 6 to the financial statements, the
  Company’s 2003 impairment of goodwill previously reported as $661,524
  should have been $766,496. This discovery was made subsequent to the issuance
  of the financial statements. The financial statements have been restated to
  reflect this correction.

|/s/ SPICER JEFFRIES LLP                                                                    
|-------------------------------------------------------------------------------------------
|Greenwood Village, Colorado                                                                
|September 29, 2003, except for Notes 2 and 6, as to which
      the date is October 4, 2005

1

---

|Garuda Capital Corp.        |             
|--------------------------- | ------------
|CONSOLIDATED BALANCE SHEETS |             
|June 30, 2003 and 2002      | (US Dollars)

|                                                                |   | 2003       |   |   | 2002       |  
|--------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                                |   |            |   |   |            |  
|ASSETS                                                          |   |            |   |   |            |  
|                                                                |   |            |   |   |            |  
|Current                                                         |   |            |   |   |            |  
|                                                                |   |            |   |   |            |  
|Accounts
      receivable                                       | $ | 100,439    |   | $ | 210,834    |  
|Available-for-sale securities                                   |   | 94,644     |   |   | 204,186    |  
|Inventory, net
      [Note 3]                                   |   | 293,222    |   |   | 365,989    |  
|Prepaid expenses                                                |   | 25,817     |   |   | 20,523     |  
|Subscriptions receivable                                        |   | -          |   |   | 100,000    |  
|                                                                |   |            |   |   |            |  
|Current assets                                                  |   | 514,122    |   |   | 901,532    |  
|Property and equipment, net [Note 4]                            |   | 282,422    |   |   | 296,854    |  
|Goodwill [Note 5]                                               |   | -          |   |   | 766,496    |  
|                                                                |   |            |   |   |            |  
|                                                                | $ | 796,544    |   | $ | 1,964,882  |  
|                                                                |   |            |   |   |            |  
|LIABILITIES                                                     |   |            |   |   |            |  
|Current                                                         |   |            |   |   |            |  
|Bank
      indebtedness [Note 7]                                | $ | 263,479    |   | $ | 10,624     |  
|Accounts payable and accrued
      expenses                     |   | 352,325    |   |   | 363,563    |  
|Unearned revenue                                                |   | -          |   |   | 35,297     |  
|Current portion of capital lease
      obligation [Note 8]      |   | 2,938      |   |   | 3,951      |  
|Bank loan
      [Note 7]                                        |   | 169,400    |   |   | -          |  
|Amounts due to shareholders [Note 9]                            |   | 335,455    |   |   | 432,504    |  
|                                                                |   |            |   |   |            |  
|Current liabilities                                             |   | 1,123,597  |   |   | 845,939    |  
|Capital lease obligation [Note 8]                               |   | 4,463      |   |   | 6,166      |  
|                                                                |   |            |   |   |            |  
|                                                                |   | 1,128,060  |   |   | 852,105    |  
|SHAREHOLDERS EQUITY (DEFICIENCY)                               |   |            |   |   |            |  
|Preferred stock, $0.001 par value;
      authorized 10,000,000; |   |            |   |   |            |  
|Issued: None                                                    |   | -          |   |   | -          |  
|Common stock, $0.001 par value; authorized
      50,000,000;    |   |            |   |   |            |  
|Issued: 6,299,575 (2002:
      6,049,578)                       |   | 6,300      |   |   | 6,050      |  
|Capital in excess of par value                                  |   | 2,437,389  |   |   | 2,359,801  |  
|Deficit                                                         |   | (2,775,205 | ) |   | (1,253,074 | )
|                                                                |   |            |   |   |            |  
|                                                                |   | (331,516   | ) |   | 1,112,777  |  
|                                                                |   |            |   |   |            |  
|                                                                | $ | 796,544    |   | $ | 1,964,882  |  

The accompanying notes are an integral part of these
statements.

2

---

|Garuda Capital Corp.                  |             
|------------------------------------- | ------------
|CONSOLIDATED STATEMENTS OF OPERATIONS |             
|Years ended June 30, 2003 and 2002    | (US Dollars)

|                                                          |   | 2003       |   |   | 2002     |  
|--------------------------------------------------------- | - | ---------- | - | - | -------- | -
|                                                          |   |            |   |   |          |  
|REVENUE                                                   |   |            |   |   |          |  
|                                                          |   |            |   |   |          |  
|Sales                                                     | $ | 2,065,888  |   | $ | 340,937  |  
|                                                          |   |            |   |   |          |  
|Cost of goods sold                                        |   | 1,569,092  |   |   | 343,711  |  
|                                                          |   | 496,796    |   |   | (2,774   | )
|                                                          |   |            |   |   |          |  
|EXPENSES                                                  |   |            |   |   |          |  
|                                                          |   |            |   |   |          |  
|General and administrative                                |   | 912,947    |   |   | 237,995  |  
|Impairment of goodwill [Note 5]                           |   | 766,496    |   |   | -        |  
|Advertising and promotion                                 |   | 310,827    |   |   | 6,457    |  
|Depreciation                                              |   | 57,309     |   |   | 15,908   |  
|                                                          |   | 2,047,579  |   |   | 260,360  |  
|                                                          |   |            |   |   |          |  
|Loss before other income                                  |   | (1,550,783 | ) |   | (263,134 | )
|                                                          |   |            |   |   |          |  
|OTHER INCOME                                              |   |            |   |   |          |  
|                                                          |   |            |   |   |          |  
|Gain on sale of marketable securities                     |   | 65,884     |   |   | 8,724    |  
|Gain (Loss) on sale
      of equipment                    |   | 9,813      |   |   | (4,046   | )
|                                                          |   |            |   |   |          |  
|NET LOSS                                                  | $ | (1,475,086 | ) | $ | (258,456 | )
|                                                          |   |            |   |   |          |  
|NET LOSS PER COMMON
      SHARE  BASIC AND FULLY DILUTED | $ | (0.23      | ) | $ | (0.53    | )
|                                                          |   |            |   |   |          |  
|WEIGHTED AVERAGE
      NUMBER OF COMMON SHARES            |   | 6,299,575  |   |   | 489,595  |  

The accompanying notes are an integral part of these
statements.

3

---

|Garuda Capital Corp.                                  |             
|----------------------------------------------------- | ------------
|CONSOLIDATED STATEMENTS OF
      COMPREHENSIVE INCOME
|Years ended June 30, 2003 and 2002                    | (US Dollars)

|                                   |   | 2003       |   |   | 2002     |  
|---------------------------------- | - | ---------- | - | - | -------- | -
|                                   |   |            |   |   |          |  
|NET LOSS                           | $ | (1,475,086 | ) | $ | (258,456 | )
|                                   |   |            |   |   |          |  
|OTHER COMPREHENSIVE INCOME (LOSS): |   |            |   |   |          |  
|Unrealized holding losses          |   | (51,770    | ) |   | -        |  
|Exchange gains                     |   | 4,725      |   |   | 3,684    |  
|COMPREHENSIVE
      LOSS           | $ | (1,522,131 | ) | $ | (254,772 | )

The accompanying notes are an integral part of these
statements.

4

---

|Garuda Capital Corp.               |             
|---------------------------------- | ------------
|CONSOLIDATED STATEMENTS OF         |             
|CHANGES IN STOCKHOLDERS EQUITY    |             
|Years ended June 30, 2003 and 2002 | (US Dollars)

|                                 |  | Common Stock |  |   | Capital in |  |   | Accumulated     |  |   |             |  
|-------------------------------- |  | ------------ |  | - | ---------- |  | - | --------------- |  | - | ----------- | -
|                                 |  |              |  |   |            |  |   | Excess of       |  |   | Deficit and |  
|                                 |  | Shares       |  |   | Amount     |  |   | Par
      Value |  |   | Other       |  
|                                 |  |              |  |   |            |  |   |                 |  |   |             |  
|Balances, June 30, 2001          |  | 247,575      |  | $ | 248        |  | $ | 160,503         |  | $ | (230,981    | )
|                                 |  |              |  |   |            |  |   |                 |  |   |             |  
|Common stock issued for cash     |  | 5,302,000    |  |   | 5,302      |  |   | 2,199,298       |  |   | -           |  
|Common stock issued for          |  |              |  |   |            |  |   |                 |  |   |             |  
|acquisition of Natural           |  |              |  |   |            |  |   |                 |  |   |             |  
|Program Inc.                     |  | 500,000      |  |   | 500        |  |   | -               |  |   | -           |  
|Translation adjustment           |  | -            |  |   | -          |  |   | -               |  |   | 3,684       |  
|Net loss                         |  | -            |  |   | -          |  |   | -               |  |   | (258,456    | )
|Distributions (Note 6)           |  | -            |  |   | -          |  |   | -               |  |   | (767,321    | )
|                                 |  |              |  |   |            |  |   |                 |  |   |             |  
|Balances, June 30, 2002          |  | 6,049,575    |  |   | 6,050      |  |   | 2,359,801       |  |   | (1,253,074  | )
|                                 |  |              |  |   |            |  |   |                 |  |   |             |  
|Common stock issued for debt     |  | 40,000       |  |   | 40         |  |   | 14,798          |  |   | -           |  
|Common stock issued for services |  | 25,000       |  |   | 25         |  |   | 7,475           |  |   | -           |  
|Common shares issued as salaries |  | 185,000      |  |   | 185        |  |   | 55,315          |  |   | -           |  
|Translation adjustment           |  | -            |  |   | -          |  |   | -               |  |   | 4,725       |  
|Unrealized loss on               |  |              |  |   |            |  |   |                 |  |   |             |  
|available-for-sale securities    |  | -            |  |   | -          |  |   | -               |  |   | (51,770     | )
|Net loss                         |  | -            |  |   | -          |  |   | -               |  |   | (1,475,086  | )
|                                 |  |              |  |   |            |  |   |                 |  |   |             |  
|Balances, June 30, 2003          |  | 6,299,575    |  | $ | 6,300      |  | $ | 2,437,389       |  | $ | (2,775,205  | )

The accompanying notes are an integral part of these
statements.

5

---

|Garuda Capital Corp.                  |             
|------------------------------------- | ------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS |             
|Years ended June 30, 2003 and 2002    | (US Dollars)

|                                                                           |   | 2003       |   |   | 2002      |  
|-------------------------------------------------------------------------- | - | ---------- | - | - | --------- | -
|                                                                           |   |            |   |   |           |  
|OPERATIONS                                                                 |   |            |   |   |           |  
|Net loss                                                                   | $ | (1,475,086 | ) | $ | (258,456  | )
|Items not involving cash:                                                  |   |            |   |   |           |  
|Depreciation                                                               |   | 57,309     |   |   | 15,908    |  
|Foreign currency
      translations                                        |   | 4,725      |   |   | 3,684     |  
|Loss on sale of equipment                                                  |   | (9,813     | ) |   | 4,046     |  
|Gain on sale of
      marketable securities                                |   | (65,884    | ) |   | (8,724    | )
|Impairment of goodwill                                                     |   | 766,496    |   |   | -         |  
|Shares issued
      for salaries                                           |   | 55,500     |   |   | -         |  
|Shares issued for services                                                 |   | 7,500      |   |   | -         |  
|Changes in operating assets and
      liabilities:                         |   |            |   |   |           |  
|Decrease in accounts receivable                                            |   | 110,395    |   |   | (775      | )
|Increase
      (Decrease) in prepaid expenses                              |   | (5,294     | ) |   | (6,477    | )
|(Decrease) Increase in accounts
      payable and accrued expenses         |   | 3,600      |   |   | 125,305   |  
|Decrease
      (Increase) in marketable securities                         |   | 123,656    |   |   | (195,462  | )
|Decrease (Increase) in inventory                                           |   | 72,767     |   |   | (116,812  | )
|(Decrease) Increase in unearned
      revenue                              |   | (35,297    | ) |   | 35,297    |  
|                                                                           |   |            |   |   |           |  
|Net cash used in operating activities                                      |   | (389,426   | ) |   | (402,466  | )
|                                                                           |   |            |   |   |           |  
|FINANCING                                                                  |   |            |   |   |           |  
|Share subscription                                                         |   | 100,000    |   |   |           |  
|Proceeds from bank loan                                                    |   | 169,400    |   |   | -         |  
|Proceeds from issuance of common shares                                    |   | -          |   |   | 2,104,600 |  
|Distributions                                                              |   | -          |   |   | (767,321  | )
|Repayment of long term debt                                                |   | -          |   |   | (757      | )
|Decrease in amounts due to shareholders                                    |   | (97,049    | ) |   | (65,429   | )
|Increase in bank indebtedness                                              |   | 252,855    |   |   | 10,624    |  
|Decrease in capital lease                                                  |   | (2,716     | ) |   | -         |  
|                                                                           |   |            |   |   |           |  
|Net cash provided by financing activities                                  |   | 422,490    |   |   | 1,281,717 |  
|                                                                           |   |            |   |   |           |  
|INVESTING                                                                  |   |            |   |   |           |  
|Acquisition of property and equipment                                      |   | (33,064    | ) |   | (121,320  | )
|Bank indebtedness acquired from acquisition
      of Hagensborg Foods Ltd. |   | -          |   |   | (52,038   | )
|Bank indebtedness acquired from acquisition of Natural
      Program Inc.  |   | -          |   |   | (6,413    | )
|Acquisition of Hagensborg Foods Ltd.                                       |   | -          |   |   | (700,000  | )
|                                                                           |   |            |   |   |           |  
|Net
      cash used in investing activities                                |   | (33,064    | ) |   | (879,771  | )
|                                                                           |   |            |   |   |           |  
|Net decrease in cash                                                       |   | -          |   |   | (520      | )
|                                                                           |   |            |   |   |           |  
|Cash, beginning of year                                                    |   | -          |   |   | 520       |  
|                                                                           |   |            |   |   |           |  
|CASH, end of year                                                          | $ | -          |   | $ | -         |  

The accompanying notes are an integral part of these
statements.

6

---

|Garuda Capital Corp.                                   |             
|------------------------------------------------------ | ------------
|CONSOLIDATED STATEMENTS OF CASH
      FLOWS(continued) |             
|Years ended June 30, 2003 and 2002                     | (US Dollars)

|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING             |   |        |  |   |         | 
|--------------------------------------------------------- | - | ------ |  | - | ------- | 
|AND FINANCING ACTIVITIES:                                 |   |        |  |   |         | 
|                                                          |   |        |  |   |         | 
|                                                          |   | 2003   |  |   | 2002    | 
|                                                          |   |        |  |   |         | 
|Supplemental disclosure of non-cash financing activities: |   |        |  |   |         | 
|Purchase of stock
      via subscription receivable       | $ | -      |  | $ | 100,000 | 
|                                                          |   |        |  |   |         | 
|Stock issued in
      settlement of liability             | $ | 14,838 |  | $ | -       | 
|Supplemental disclosure of non-cash investing activities: |   |        |  |   |         | 
|Common stock
      issued for purchase of subsidiary      | $ | -      |  | $ | 500     | 
|                                                          |   |        |  |   |         | 
|Cash paid for interest                                    | $ | 46,476 |  | $ | 40,143  | 

The accompanying notes are an integral part of these
statements.

7

---

|Garuda Capital Corp.                             |             
|------------------------------------------------ | ------------
|                                                 |             
|NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS |             
|                                                 |             
|Years ended June 30, 2003 and 2002               | (US Dollars)

|1. | NATURE OF OPERATIONS AND BASIS OF PRESENTATION
|-- | ----------------------------------------------

Organization The Company was incorporated in Nevada on
July 8, 1997 and is a public company traded on the NASDAQ OTC bulletin board. On
February 14, 2003, the Company changed its name from Vanstar Films, Inc. to
Garuda Capital Corp.

Nature of Operations The Company, through it
subsidiaries, sells and processes specialty food products and herbal medication
to wholesale and retail customers in North America.

Going Concern -For the year ended June 30, 2003, the Company
  incurred a net loss of $1,475,086. The Company's ability to continue its operations
  and to realize assets at their carrying values is dependent upon the continued
  support of its shareholders, obtaining additional financing and generating revenues
  sufficient to cover its operating costs. Managements plans in regard to
  these matters are to raise additional equity funds as to meet any operating
  needs. The financial statements do not give effect to any adjustments which
  would be necessary should the Company be unable to continue as a going concern
  and therefore be required to realize its assets and discharge its liabilities
  at amounts different from those reflected in these consolidated financial statements.

|2. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

Principles of consolidation and basis of accounting The consolidated financial statements include the accounts of the Company
  and its wholly owned subsidiaries, as follows:

Garuda Ventures Canada Inc. and Garuda Gold Corp. are companies
with no active business operations. Hagensborg Foods Ltd. (HFL) processes and
sells specialty food products to wholesale and retail customers in North
America. Hagensborg Seafoods Ltd. (HSL) processes and sells high-quality
seafood products throughout North America. Natural Program Inc. (NPI) sells
natural herbal products to wholesale and retail customers in North America.

All intercompany accounts and transactions have been eliminated
in consolidation.

Available-for-sale securities- The Company has invested
in various securities classified as available-for-sale at June 30, 2003. These
securities are carried at market value, with unrealized gains and losses
reported as a separate component of shareholders equity. At June 30, 2003,
these securities had a fair market value of $94,644, which exceeded their cost
basis by $51,770.

Inventory- Inventory is recorded at the lower of
average cost or market. Cost includes materials, labor and applicable warehouse
overhead. Market is replacement cost for raw materials and supplies and net
realizable value for finished goods. The Company has recorded an allowance of
$25,000 for inventory obsolescence.

Goodwill -Goodwill represented the excess of the cost
of the acquisition over the fair value of the net identifiable assets acquired.
Under Statement of Financial Accounting Standards No. 142, on an ongoing basis,
management reviews the valuation of goodwill, including any events and
circumstances which may have impaired its fair value. The amount of goodwill
impairment, if any, is determined by assessing recoverability based on expected
future cash flows and market conditions. Any impairment, other than temporary,
in the carrying value is charged to earnings in the year incurred (see note
5).

Reclassifications and Restatement of Financial Statements
  In connection with the audit of 2004 financial statements, the Company
  identified errors in amounts previously reported in its financial statements
  for the year ended December 31, 2003. The Company made an error in recording
  the acquisition of assets from a related party (see Note 6). Equipment in the
  amount of $104,972 was purchased and recorded as property and equipment when
  it should have been recorded as goodwill as the equipment was sold to offset
  debt owed by the related party. The goodwill was then determined impaired and
  written-off. The Company therefore decided it was appropriate to restate its
  financial information for the year ended December 31, 2003.

The following table sets forth the impact of its restatement
  on certain amounts previously reported in the Consolidated Balance Sheet at
  December 31, 2003 and Consolidated Statements of Operations for the year ended
  December 31, 2003:

|                                  |  | 2003 As    |   |  | 2003 As    |  
|--------------------------------- |  | ---------- | - |  | ---------- | -
|                                  |  | Reported   |   |  | Restated   |  
|                                  |  |            |   |  |            |  
|Balance Sheet                     |  |            |   |  |            |  
|Property and equipment,
      net |  | 387,394    |   |  | 282,422    |  
|Total assets                      |  | 901,516    |   |  | 796,544    |  
|Deficit                           |  | (2,670,233 | ) |  | (2,775,205 | )
|Total shareholders deficit       |  | (226,544   | ) |  | (331,516   | )
|                                  |  |            |   |  |            |  
|Statement of Operations           |  |            |   |  |            |  
|Impairment of goodwill            |  | 661,524    |   |  | 766,496    |  
|Loss before other income          |  | (1,445,811 | ) |  | (1,550,783 | )

8

---

|Garuda Capital Corp.                                      |             
|--------------------------------------------------------- | ------------
|                                                          |             
|NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTScontinued |             
|                                                          |             
|Years ended June 30, 2003 and 2002                        | (US Dollars)

|2. | SIGNIFICANT ACCOUNTING POLICIES
      (continued)
|-- | -------------------------------------------------

Revenue recognition  The Company ships its products by
common carrier and also sells products in its wholesale establishment. The
Company receives its product sales price in the form of cash, credit card or on
approved terms. The Company historically averages less than 1% in credits for
returned or unsold products. Sales revenue and related discounts or volume
incentives are recorded when the merchandise is shipped since performance by the
Company is considered met when products are in the hands of the common carrier.
The Companys reserve on accounts receivable takes into consideration future
potential credits, if any, from the sale of products to customers.

Property and equipment- Property and equipment is
recorded at cost less accumulated depreciation. Depreciation is provided for
over the estimated useful lives of the assets on the following basis and annual
rates:

|Asset                                | Basis             | Rate    
|------------------------------------ | ----------------- | --------
|                                     |                   |         
|Manufacturing equipment              | Straight-line     | 15 years
|Manufacturing tools                  | Straight-line     | 15 years
|Furniture and fixtures               | Straight-line     | 15 years
|Leasehold improvements               | Straight-line     | 20%     
|Computer hardware and
      software | Straight-line     | 15 years
|Trademarks                           | Declining balance | 20%     

Foreign currency translation As the majority of the
Companys operations are in Canada, the Canadian dollar has been chosen as the
Companys functional currency. All Canadian dollar denominated balances and
transactions have been translated into US funds as follows: monetary assets and
liabilities are translated at current rates of exchange and other assets and
liabilities are translated at historical rates of exchange. Revenue and expenses
are translated at average rates of exchange for the year, except for
depreciation and amortization that are translated at rates in effect when the
related assets were acquired. All exchange gains and losses are recorded as a
separate component of shareholders equity.

Leases- Leases are classified as capital or operating
leases. Leases which transfer substantially the entire benefits and risks
incident to ownership of property are accounted for as capital leases. All other
leases are accounted for as operating leases and the related lease payments are
charged to expense as incurred.

Fair value of financial instruments- Substantially all
of the Companys assets and liabilities are carried at fair value or contracted
amounts that approximate fair value. Estimates of fair value are made at a
specific point in time, based on relative market information and information
about the financial instrument, specifically, the value of the underlying
financial instrument. Assets that are recorded at fair value consist largely of
short-term receivables and marketable securities, which are carried at
contracted amounts that approximate fair value. Similarly, the Companys
liabilities consist of short term liabilities and shareholder loans recorded at
contracted amounts that approximate fair value.

Income taxes Income taxes are accounted for under the
asset and liability method. Deferred tax assets and liabilities are recognized
for future timing differences between the financial statement carrying amounts
and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered.

9

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|2. | SIGNIFICANT ACCOUNTING POLICIES
      (continued)
|-- | -------------------------------------------------

Use of estimates -The preparation of financial statements
  in conformity with accounting principles generally accepted in the United States
  of America requires management to make estimates and assumptions that affect
  the reported amounts of assets and liabilities and disclosure of contingent
  assets and liabilities at the date of the financial statements and the reported
  amounts of revenues and expenses during the reporting period. Actual results
  could differ from those estimates.

Long-lived assets- The Company reviews its long-lived
assets for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. For purposes of evaluating
the recoverability of long-lived assets, the recoverability test is performed
using undiscounted net cash flows estimated to be generated by the asset.

Stock split During the year ended June 30, 2002, the
Companys Board of Directors initiated a 20:1 reverse stock split. All
references to shares have been restated to reflect the stock split.

Reclassifications Certain prior year amounts have
  been reclassified to conform to the current year presentation.

|3. | INVENTORY
|-- | ---------

|                   |   |         |  |  |         | 
|------------------ | - | ------- |  |  | ------- | 
|                   |   | 2003    |  |  | 2002    | 
|                   |   |         |  |  |         | 
|Packaging supplies | $ | 170,495 |  |  | 202,072 | 
|Finished goods     |   | 74,906  |  |  | 111,035 | 
|Raw materials      |   | 43,580  |  |  | 48,641  | 
|Other supplies     |   | 4,241   |  |  | 4,241   | 
|                   |   |         |  |  |         | 
|                   | $ | 293,222 |  |  | 365,989 | 

|4. | PROPERTY AND EQUIPMENT
|-- | ----------------------

|                               |   |         |  |   |              |  |   |                | 
|------------------------------ | - | ------- |  | - | ------------ |  | - | -------------- | 
|                               |   |         |  |   | Accumulated  |  |   | Net Book Value | 
|                               |   | Cost    |  |   | Depreciation |  |   | 2003           | 
|                               |   |         |  |   |              |  |   |                | 
|Manufacturing equipment        | $ | 400,848 |  | $ | 191,681      |  | $ | 209,167        | 
|Manufacturing tools            |   | 41,741  |  |   | 22,217       |  |   | 19,524         | 
|Furniture and fixtures         |   | 44,449  |  |   | 23,766       |  |   | 20,683         | 
|Computer hardware and software |   | 76,202  |  |   | 59,376       |  |   | 16,826         | 
|Trademarks                     |   | 31,424  |  |   | 15,202       |  |   | 16,222         | 
|Leasehold improvements         |   | 91,033  |  |   | 91,033       |  |   | -              | 
|Automobile                     |   | -       |  |   | -            |  |   | -              | 
|                               |   |         |  |   |              |  |   |                | 
|                               | $ | 685,697 |  | $ | 403,275      |  | $ | 282,422        | 

10

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|5. | BUSINESS COMBINATIONS
|-- | ---------------------

Hagensborg Foods Ltd- Effective April 1, 2002, the
Company acquired 100% of Hagensborg Foods Ltd. for $700,000. This business
combination was accounted for under the purchase method of accounting.

The purchase price was allocated to the fair market value of
the assets purchased and liabilities assumed. The purchase price was allocated
as follows:

| | Purchase price, net of cash
      acquired | $ | 700,000  |   |  |  | 
| | ------------------------------------------ | - | -------- | - |  |  | 
| |                                            |   |          |   |  |  | 
| | Allocated as follows:                      |   |          |   |  |  | 
| | Property and equipment                     |   | 178,291  |   |  |  | 
| | Working capital acquired                   |   | 251,676  |   |  |  | 
| | Capital leases and other debt              |   | (496,463 | ) |  |  | 
| | Goodwill                                   |   | 766,496  |   |  |  | 
| |                                            | $ | 700,000  |   |  |  | 

The goodwill associated with the acquisition of Hagensborg
Foods, Ltd. was reviewed in the fourth quarter of fiscal 2003 for impairment.
The Company reviews its intangible assets at least annually or more frequently
upon the occurrence of an event or when circumstances indicate that a reporting
units carrying amount is greater than its fair value. The Company after
monitoring the operations of Hagensborg Foods, Ltd. since acquiring it on April
1, 2002, have determined that its carrying amount exceeded its fair value, which
was estimated based on the present value of expected future cash inflows.
Accordingly, a goodwill impairment loss of $766,496 was recognized in that
reporting unit.

Natural Program Inc.- Effective April 1, 2002, the
Company acquired 100% of Natural Program Inc., accounted for under the purchase
method of accounting, by issuing 500,000 common shares at a deemed value of
$0.50 per share.

The purchase price has been allocated to the fair market value
of the assets purchased and liabilities assumed on the following basis:

| | Purchase price, net of cash acquired | $ | 500     |   |  |  | 
| | ------------------------------------ | - | ------- | - |  |  | 
| |                                      |   |         |   |  |  | 
| | Allocated as follows:                |   |         |   |  |  | 
| | Property and equipment               |   | 17,197  |   |  |  | 
| | Working capital deficiency           |   | (4,354  | ) |  |  | 
| | Capital leases and other debt        |   | (12,343 | ) |  |  | 
| |                                      | $ | 500     |   |  |  | 

11

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|6. | ACQUISITION OF ASSETS
|-- | ---------------------

On April 19, 2002, the Company acquired all the assets of Hagensborg
  Foods Corp. (HFC), excluding the cash and accounts receivable, for
  $1,000,0000. HFC shares certain common shareholders and directors with the Company
  and is therefore considered to be a related party for accounting purposes. Related
  party transactions are usually measured at the transferors carrying amount
  in the absence of independent verification. Carrying amounts are defined as
  the cost amount on the accounts of the transferor after adjusting for any amortization
  or impairment in value. In its financial statements included in its 10-KSB for
  the year ended June 30, 2002, the Company recorded the acquisition of assets
  at HFCs carrying value of $232,679, $104,972 in equipment and $127,707
  in inventory. $104,972 was allocated to equipment based on information provided
  at the time of the purchase. The physical housing of the asset was given as
  St. Jeans Cannery, Nanaimo, British Columbia, Canada. The allocation of $104,972
  to equipment, however, was in error. Upon a physical verification of the equipment,
  it was determined that the equipment was sold in May 2001 to St. Jeans Cannery
  to offset debt owed by HRC. Had this information been disclosed at the time
  of purchase, the $104,972 would have been allocated to goodwill. In 2003, the
  Company decided that with the losses incurred by Hagensborg Foods Ltd., goodwill
  was impaired and was written off. We have therefore restated these financials
  to reflect the change. The difference between the carrying amount and the agreed
  exchange amount of $767,321 has been charged to deficit as a shareholder distribution
  during the year ending June 30, 2002.

|7. | BANK INDEBTEDNESS AND BANK
      LOANS
|-- | --------------------------------------

Demand loan- The Company has a demand loan of $200,000.
  As of June 30, 2003 the Company had drawn $169,400 of this loan. The loan is
  personally guaranteed by a shareholder of the Company. Outstanding advances
  bear interest at the banks base rate (4.5% at June 30, 2003) plus 2%, payable
  on demand by the bank, secured by all present and future personal property acquired
  by HFL.

Assuming demand is not made the annual loan principal payments
are due on June 30 of each year as follows:

| | 2004 | $ | 40,800  |  | 
| | ---- | - | ------- |  | 
| | 2005 |   | 40,800  |  | 
| | 2006 |   | 40,800  |  | 
| | 2007 |   | 47,000  |  | 
| |      |   |         |  | 
| |      | $ | 169,400 |  | 

Overdraft The Company has a bank overdraft facility
  in the amount of $250,000. Outstanding advances bear interest at the banks base
  rate (4.5% at June 30, 2003) plus 2%. At June 30, 2003, the Company had an outstanding
  balance of $263,479 on this overdraft facility. The facility is personally guaranteed
  by a shareholder of the Company and all present and future personal property
  acquired by HFL.

|8. | CAPITAL LEASE OBLIGATIONS
|-- | -------------------------

Future minimum payments and the obligations due under capital
leases are as follows:

| |                                         |   | 2003   |   |   | 2002   |  
| | --------------------------------------- | - | ------ | - | - | ------ | -
| |                                         |   |        |   |   |        |  
| | 2003                                    | $ | -      |   | $ | 5,164  |  
| | 2004                                    |   | 5,164  |   |   | 5,164  |  
| | 2005                                    |   | 2,128  |   |   | 2,128  |  
| |                                         |   |        |   |   |        |  
| |                                         |   | 7,292  |   |   | 12,456 |  
| | Less
      amount representing interest |   | -      |   |   | (2,339 | )
| |                                         |   |        |   |   |        |  
| |                                         |   | 7,292  |   |   | 10,117 |  
| | Less current portion                    |   | (2,938 | ) |   | (3,951 | )
| |                                         | $ | 4,463  |   | $ | 6,166  |  

Interest of $502 was imputed on the capital leases, at a rate
  of 1.88% .

12

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|9. | AMOUNTS DUE TO SHAREHOLDERS
|-- | ---------------------------

The Company is indebted to certain shareholders as follows:

|                                                                          |   | 2003    |  |   | 2002    | 
|------------------------------------------------------------------------- | - | ------- |  | - | ------- | 
|                                                                          |   |         |  |   |         | 
|Shareholder note bearing interest at 30%,
      due August 1, 2003        |   |         |  |   |         | 
|unsecured                                                                 | $ | 56,000  |  | $ | -       | 
|                                                                          |   |         |  |   |         | 
|Shareholder notes bearing interest at 10%, due September 1,
      2003    |   |         |  |   | -       | 
|secured by all personal property of HFL and
      GGC                     |   | 100,000 |  |   |         | 
|                                                                          |   |         |  |   |         | 
|Shareholder notes bearing interest at 10%,
      due November 1, 2003     |   |         |  |   |         | 
|secured by all
      personal property o HFL and GGC                      |   | 175,000 |  |   | -       | 
|                                                                          |   |         |  |   |         | 
|                                                                          |   | 331,000 |  |   | -       | 
|                                                                          |   |         |  |   |         | 
|Advances from shareholders, unsecured, non-interest bearing
      with no |   |         |  |   |         | 
|specified due dates                                                       |   | 4,455   |  |   | 432,504 | 
|                                                                          |   |         |  |   |         | 
|                                                                          | $ | 335,455 |  | $ | 432,504 | 

|10. | STOCKHOLDERS EQUITY
|--- | --------------------

In February 2002, the Company issued 1,000,000 shares of common
  stock for $100,000.

In addition, during 2002 the Company issued 4,302,000 units for
$0.50 per unit. Each unit consisted of one common share and one non-transferable
warrant. Each warrant entitles the holder thereof to purchase one additional
common share at a price of $0.50 per share up to April 12, 2003, $0.60 per share
up to April 12, 2004, $0.70 per share up to April 12, 2005.

For the year ended June 30, 2003, the Company issued 210,000
shares of common stock valued at $63,000 to employees and consultants of the
Company for services rendered. In addition, the Company issued 40,000 shares of
common stock valued at $14,838 to prior employees of the Company for amounts due
them.

13

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|11. | STOCK OPTIONS
|--- | -------------

On October 10, 2002, the Company's Board of Directors adopted
  the 2002 Stock Option Plan (the "Plan"). The aggregate number of shares of common
  stock that may be granted by the Company will not exceed a maximum of 2,000,000
  shares during the period of the Plan. The Board of Directors may at any time
  terminate the Plan. The option price per share is determined by the Board of
  Directors when the stock option is granted but may not be less than the fair
  market value per share on the date of grant.

If for any reason a recapitalization, sale or merger of the
Company occurs, all shares subject to the stock option Plan shall be immediately
adjusted proportionally. The Board of Directors may amend the Plan at any time.

Information with respect to all options is as follows:

|                              |  |              |  |  |          |  |   |          |  |   | Weighted |  |  | Weighted   | 
|----------------------------- |  | ------------ |  |  | -------- |  | - | -------- |  | - | -------- |  |  | ---------- | 
|                              |  |              |  |  | Other    |  |   | Exercise |  |   | Average  |  |  | Average    | 
|                              |  | Compensation |  |  | Options  |  |   | Price    |  |   | Exercise |  |  | Remaining  | 
|                              |  | Plan         |  |  | And      |  |   | Range    |  |   | Price    |  |  | Life       | 
|                              |  |              |  |  | Warrants |  |   |          |  |   |          |  |  |            | 
|                              |  |              |  |  |          |  |   |          |  |   |          |  |  |            | 
|Balances at June 30, 2002     |  | -            |  |  | -        |  | $ | -        |  | $ | -        |  |  |            | 
|Granted                       |  | 675,000      |  |  | -        |  |   | 0.30     |  |   | 0.30     |  |  | 5 years    | 
|Forfeited                     |  | -            |  |  | -        |  |   | -        |  |   | -        |  |  |            | 
|                              |  |              |  |  |          |  |   |          |  |   |          |  |  |            | 
|Balances at June 30, 2003     |  | 675,000      |  |  | -        |  | $ | 0.30     |  | $ | 0.30     |  |  | 4.71 years | 
|                              |  |              |  |  |          |  |   |          |  |   |          |  |  |            | 
|Number of options exercisable |  |              |  |  |          |  |   |          |  |   |          |  |  |            | 
|At June 30, 2003              |  | -            |  |  | -        |  | $ | -        |  | $ | -        |  |  |            | 

At June 30, 2003 1,325,000 share options were available for
future grant under the Plan.

The Company measures compensation cost under APB #25 based on
the intrinsic value of the options at the grant date. The 130,000 options
granted on October 10, 2002 vest in total one year after the date of grant. The
options were granted at the quoted market price of $0.30, therefore no
compensation cost will be incurred when the option vest under the intrinsic
method.

Had the Company measured compensation cost based on the fair
value of the options at the grant date consistent with the method prescribed by
SFAS 123, the Company will incur compensation cost when the options vest in
fiscal 2004 of $200,537.

14

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|11. | STOCK OPTIONS (continued)
|--- | -------------------------

|                                                               |   | 2003       |   |   | 2002     |   | 
|-------------------------------------------------------------- | - | ---------- | - | - | -------- | - | 
|                                                               |   |            |   |   |          |   | 
|Net loss, as reported                                          | $ | (1,475,086 | ) | $ | (258,456 | ) | 
|                                                               |   |            |   |   |          |   | 
|Add: Stock-based employee compensation expense                 |   |            |   |   |          |   | 
|included in reported net income, net of related tax effects    |   | -          |   |   | -        |   | 
|                                                               |   |            |   |   |          |   | 
|Deduct: Total stock-based employee compensation                |   |            |   |   |          |   | 
|expense determined under fair value based method
      for all |   |            |   |   |          |   | 
|awards, net of related tax effects                             |   | -          |   |   | -        |   | 
|                                                               |   |            |   |   |          |   | 
|Pro forma net loss                                             | $ | (1,475,086 | ) | $ | (258,456 | ) | 
|                                                               |   |            |   |   |          |   | 
|Earnings per share:                                            |   |            |   |   |          |   | 
|Basic and diluted
      earnings (loss) per common share       | $ | (0.23      | ) | $ | (0.53    | ) | 
|As reported                                                    |   | (0.23      | ) |   | (0.53    | ) | 
|Pro
      forma                                                |   |            |   |   |          |   | 

The fair value of each option grant was estimated at the date
  of the grant using the Black-Scholes option pricing model with the following
  assumptions for 2003: risk-free interest rate of 1.74%; no dividend yield; expected
  life of 5 years; and volatility of 230%.

|12. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

During the year the Company had the following related party transactions:

| | (a) | During 2003, the Company had product sales of $456,841
        (2002: $368,787) in the normal course of business from HFC.                                                                    
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                               
| | (b) | For the years ended June 30, 2003 and 2002 the Company
        incurred consulting and management fees of $148,500 and $48,775, respectively
        to officers and directors of the Company.
| |     |                                                                                                                                                                                               
| | (c) | The Company paid a $18,000 fee to the president of
        the Company for his personal guarantee of a loan received by the Company
        (see note 7).                                     
| |     |                                                                                                                                                                                               
| | (d) | Accounts payable includes $11,408 due to officers
        and directors of the Company for consulting and management fees.                                                                    
| |     |                                                                                                                                                                                               
| | (e) | The Company incurred accounting fees of $2,493 to
        a company owned by a director of the Company.                                                                                       
| |     |                                                                                                                                                                                               
| | (g) | The Company incurred marketing charges of $110,223
        to HFC.                                                                                                                            
| |     |                                                                                                                                                                                               
| | (h) | The Company incurred bad debts of $167,672 from HFC.                                                                                                                                          

15

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|13. | COMMITMENTS
|--- | -----------

The Company leases certain premises and equipment. Annual minimum
  lease payments for 2004 are $100,827.

Rent expense for the years ended June 30, 2003 and 2002 was $139,765
  and $32,664, respectively.

|14. | INCOME TAXES
|--- | ------------

The Company has a Canadian net operating loss carryforward of
approximately $1,830,000 and a United States net operating loss carryforward of
$550,000 that may be available to be applied against any future taxable income.
These net operating loss carryforwards may result in future income tax benefits
of approximately $692,000, however, because realization is uncertain at this
time, a valuation reserve in the same amount has been established. Significant
components of the Companys deferred tax liabilities and assets as of June 30,
2003 and 2002 are as follows:

|                                       |   | 2003     |   |   | 2002     |  
|-------------------------------------- | - | -------- | - | - | -------- | -
|                                       |   |          |   |   |          |  
|Deferred tax liabilities               | $ | -        |   | $ | -        |  
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|Deferred tax assets:                   |   |          |   |   |          |  
|Net operating loss
      carryforwards | $ | 919,000  |   | $ | 692,000  |  
|Valuation
      allowance              |   | (919,000 | ) |   | (692,000 | )
|                                       | $ | -        |   | $ | -        |  

The valuation allowance for deferred tax assets was increased
by $227,000 and $231,000 during the years ended June 30, 2003 and 2002,
respectively.

The Companys net operating loss carryforwards, if not used,
will expire as follows:

|     |   | Canadian  |  | 
|---- | - | --------- |  | 
|     |   |           |  | 
|2006 | $ | 398,000   |  | 
|2007 |   | 552,000   |  | 
|2008 |   | 146,000   |  | 
|2009 |   | 201,000   |  | 
|2010 |   | 533,000   |  | 
|     |   |           |  | 
|     | $ | 1,830,000 |  | 

The Companys United States net operating loss carryforward
will expire through 2022.

16

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|15. | SEGMENT INFORMATION
|--- | -------------------

The Financial Accounting Standards Board has released statement
  #131 "Disclosures about Segments of an Enterprise and Related Information" which
  is effective for all financial reporting periods subsequent to December 15,
  1997. This statement requires the reporting of certain information about operating
  segments. The following table reflects certain information as promulgated by
  the statement for the years ended June 30, 2003 and 2002:

|June 30, 2003       |  
|------------------- | -
|                    |  
|                    |  
|                    |  
|Gross Profit        | $
|Other income (loss) |  
|Net income (loss)   |  
|Segment assets      |  
|Segment liabilities |  
|                    |  
|June 30, 2002       |  
|                    |  
|                    |  
|                    |  
|Gross Profit        | $
|Other income (loss) |  
|Net income (loss)   |  
|Segment assets      |  
|Segment liabilities |  

|16. | MAJOR CUSTOMERS
|--- | ---------------

During the years ended June 30, 2003 and 2002, the Company recognized
  revenue from various unrelated entities which individually comprised greater
  than 10% of total revenues. Revenue recognized from such entities was 27% and
  23% in 2003 and 25% and 12% in 2002.

Major customers accounted for 34% and 18% of total receivables
  at June 30, 2003 and 20% and 10% at June 30, 2002.

|17. | SUBSEQUENT EVENTS
|--- | -----------------

The Company is in the process of preparing and delivering a rights
  offering to all of the Corporations holders of its common stock to acquire
  one share of common stock for every share held as of the record date at a price
  of $0.15 per share.

17

---

|Garuda Capital Corp.                                |             
|--------------------------------------------------- | ------------
|                                                    |             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTScontinued |             
|                                                    |             
|Years ended June 30, 2003 and 2002                  | (US Dollars)

|18. | FORTH QUARTER ADJUSTMENTS
|--- | -------------------------

As of June 30, 2003, the Company recorded an impairment of goodwill
  in the amount of $766,496. In addition, on October 10, 2002 the Company issued
  stock as compensation to certain officers, directors and employees valued at
  $63,000. These were not recorded by the Company until the forth quarter of 2003.

|19. | OFF-BALANCE SHEET RISKS
|--- | -----------------------

The Company has purchased securities as investments and may incur
  losses if the market value of these securities decline subsequent to June 30,
  2003.

Pursuant to HFCs loan facility (see note 7), the Company ratio
of current assets to current liabilities cannot exceed 1.2 to 1.0. At June 30,
2003 the Company was in violation of this condition. As of the date of this
report, the bank has not taken any action relating to this violation.

18

---

Item 8a. Controls And Procedures

The Company maintains disclosure controls and procedures that
are designed to ensure that information required to be disclosed in the
Company's Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to the Company's management,
including its Chief Executive Officer / Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure based closely on the
definition of "disclosure controls and procedures" in Rule 13a-14(c). In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and
procedures.

Within 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer /
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective.

There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect the
internal controls subsequent to the date the Company completed its
evaluation.

PART III

Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act.

Management

Our executive officers and directors and their ages are as
follows:

|Name                |  | Age |  | Position                                       
|------------------- |  | --- |  | -----------------------------------------------
|                    |  |     |  |                                                
|C. Robin Relph      |  | 54  |  | President, CEO, Director                       
|G. Arnold Armstrong |  | 74  |  | Chairman, Director                             
|Juergen Wolf        |  | 68  |  | Independent Director                           
|Joyce Groote        |  | 46  |  | President, Director, Natural Program Inc.      
|Birgit Troy         |  | 29  |  | Secretary, Director, Natural
      Program Inc.

19

---

G. Arnold Armstrong, Director, Chairman, Garuda Capital
  Corp.
           Senior partner at the
  law firm Armstrong & Company (Vancouver, Canada) from August,1976 to present.
           President and CEO of International
  Cetec Investments Inc. (Vancouver, Canada) from April, 1994 to present 
           Chairman and CEO of SKN Resources
  Ltd. (Vancouver, Canada) from June, 2000 to present. 
           President and Director of International
  Enexco Limited (Vancouver, Canada) from March, 1975 to present.
           President and Director
  of Ivory Oils & Minerals Inc. (Vancouver, Canada) from March, 1991 to present
  .
           President and a Director
  of Gibsons Marina Hotel Inc. (Gibsons, Canada) from September, 1983 to present.

C. Robin Relph, Director, President, Garuda Capital Corp.
           President and Director
  of Garuda Capital Corporation from May 2002 to present. 
           Director of Valerie Gold Resources
  (Vancouver, Canada) from 1995 -1997. 
           Director and President of Buckingham
  Securities Ltd, (London England) from 1988 to present.
           Chairman and Director
  of Hagensborg Food Corporation (Kent, USA) and Hagensborg Foods Limited (Vancouver,
  Canada) from 1998 to 
                    
  present.
           Director of Natural Program
  Ltd. and Natural Program Inc. from July 2000 to present.

Juergen Wolf, Independent Director, Garuda Capital Corp.
  
           Director of Garuda Capital
  Corp. from October 2002 to present.
           Director of Hagensborg
  Foods Ltd. (Vancouver, Canada) from 1999 to present.
           President of US OIL and
  Gas Resources Inc. (TSX: USR) (Vancouver, Canada) from 1999 to present.
           Director of Key Capital
  (TSX: KYC) (Vancouver, Canada) from 1996 to 2000.
           Director of Tasty Fries Inc.
  (OTC BB: TFRY) from 1995 to present.
           Director of Shoreham Resources
  (TSX: SMH) (Vancouver, Canada) from 1991 to present. 
           President of J.A. Wolf Projects
  Ltd. (Vancouver, Canada) from 1984 to 2001.

Joyce Groote, MSc, MBA, President, CEO and Director of
  Natural Program Inc. 
           President, Crossing Sectors
  Inc. (Vancouver, Canada) from 2001 to present.
           President, Groote Consulting
  Inc., Ottawa, ON from1995 to 2001. President, BIOTECanada, Ottawa, ON from 1998
  to 2001.
           President, Industrial
  Biotechnology Association of Canada (IBAC), Ottawa, ON, from 1997 to 1998.
           Executive Director, Food
  Biotechnology Communications Network, Ottawa, ON from 1995 to 1997.

Birgit Troy,MBA, Secretary, Garuda Capital Corp.
           Corporate Secretary of
  Garuda Capital Corp. (Vancouver, Canada) from January 2002 to present. 
           Director of Natural Program
  Ltd. (Vancouver, Canada) from May 2001 to present.
           Director of Natural Program
  Inc. (Nevada) from 2001 to present. 
           COO of FreeView Publishing
  Inc. (Vancouver, Canada) from May 1999 to November 2000. 
           University of Victoria, Canada
  MBA Program from August 1998 to December 1999.

20

---

Compliance with Section 16(a) of Securities Exchange Act of
1934To our knowledge, during the fiscal year ended June 30, 2003, our
Directors and Officers have filed the required Section 16(a) reports.

Family RelationshipsThere are no family
relationships between any of our Directors, executive officers or persons
nominated or chosen to become a Director or executive officer.

Item 10. Executive Compensation.

Summary Compensation Table

The following table shows for the fiscal year ending June 30,
2003, the compensation awarded or paid by us to our Chief Executive Officer and
any of the executive officers whose total salary and bonus exceeded $100,000
during such year (The Named Executive Officers):

SUMMARY
        COMPENSATION TABLELong
        Term CompensationAnnual
        Compensation
      Awards
      PayoutsName and PrinciplePosition
      Year
      Salary ($)
      Other Annual  Compensation   ($)
      Securities   Underlying   Options (#)
      All Other   Compensation   ($)C.
        Robin  Relph, President
      May 2002 to
        June 30, 2003
      $72,000
      0
      40,000 common 
        shares granted
        Oct. 10, 2002
        200,000 options
        granted Oct. 10, 
        2002
      0


Employment Agreements and Executive Compensation

We have no written employment agreements with executive
officers at this time. The following consulting fees are being paid: Robin
Relph,                          
President                       
US $ 72,000 per year.Birgit
Schrott,                        
Secretary                        US
$ 42, 000 per year.

Compensation of Directors

Directors are entitled to receive reimbursement for all
out-of-pocket expenses incurred for attendance at Board of Directors meetings.

Other
Arrangements:                  
There are no other arrangements.

Termination of Employment and Change of Control
Arrangement

There is no compensatory plan or arrangement with respect to
any individual named above which results or will result from the resignation,
retirement or any other termination of employment with US, or from a change in
our control.

21

---

Transactions with Management

During the past fiscal year and as of September 30, 2003,
Garuda entered into the following transactions in which certain of its officers
or directors have a direct or indirect material interest.

|- | We incurred consulting fees
        of $72,000 to Robin Relph.                                                                                                                                                      
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | We paid consulting fees of
        $42,000 to Birgit Troy.                                                                                                                                                          
|- | We paid consulting
        fees of $21,400 to BCG Inc., an entity 50% owned by Joyce Groote, President
        of Natural Program Inc.                                                                              
|
|- | We issued 25,000
        common shares to Robin Relph as a recruitment bonus for hiring Joyce Groote.                                                                                                               
|
|- | We issued 25,000
        common shares to BCG Inc., an entity 50% owned by Joyce Groote, President
        of Natural Program Inc., as a signing bonus to Ms. Groote.                                               
|
|- | We issued 30,000
        common shares to BCG Inc., an entity 50% owned by Joyce Groote, President
        of Natural Program Inc., as part of Ms. Grootes monthly compensation
        for the 2003 calendar year.
|
|
|- | We issued 5,000
        common shares to Farhad Bahrami, former President of Hagensborg Foods
        Ltd., for debt.                                                                                               
|
|- | We issued 69,000
        common shares to BCG Inc., an entity 50% owned by Rick Walter, as part
        of Mr. Walters compensation as a management consultant to Hagensborg
        Foods Ltd.                    
|
|- | We issued 40,000
        common shares to John Curry, a former director and CFO of Garuda Capital
        Corp. for $14,838 in outstanding debt.                                                                    
|

Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.

The following table sets forth the number of shares of our
Common Stock beneficially owned as of June 30, 2003 by individual directors and
executive officers and by all directors and executive officers as a group.

Name and Address
      of Beneficial Owner
    Title
    
    
    Common Stock
      Ownership
    Percentage of Shares OutstandingC. Robin Relph #4, Arbour
      Island Old Fort Bay New Providence Bahamas
    President,
      Director
      343,574
        435,200
          86,000    
      582,258   
          
        192,000  
          300,000
      
      Directly owned by Mr. Relph 
          Owned by Buckingham Securities Limited, Mr. Relph is Managing Director
          and 60% shareholder. 
          Owned by Hagensborg Food Corp., Mr. Relph is a Director and minority
          shareholder in Hagensborg Food Corp. 
          Owned by Garuda Ventures Ltd., Mr. Relph is a Director of the company.
          He disclaims any beneficial ownership in these shares; 
          Owned by Rigpa Foundation, a charitable foundation. Mr. Relph is Chairman
          of the Board of Trustees of Rigpa and disclaims any beneficial ownership
          in these shares; 
          Owned by Zambala Ventures Ltd. Mr. Relph is a Director of the company.
          He disclaims any beneficial ownership in these shares;


22

---

1,939,032
    
    
      30.2%Birgit
      Troy 908 Glenayre Drive, Port Moody V3H 1J4 Canada
    Secretary
    70,000
    
    
    1.1%Arnold
      Armstrong 480-650 W. Georgia St. Vancouver, B.C. Canada,
      V6B 4N9
    Director, Chairman
    20,000 600,000     100,000  
        
        720,000
    
    Owned by Mr. Armstrong Owned by International Cetec
      Investments Inc., Mr. Armstrong is Chairman of this company.
      Owned by Sentarn Enterprises. Mr. Armstrong owns 67% of Celvin
      Grove Estates Ltd. which owns 100% of Sentarn Enterprises Ltd.
      11.3%Juergen Wolf
    Director
    60,000
    
    Owned
      by Mr. Wolf
    0.9%Joyce
      Groote 3806 W 33rdAve, Vancouver, BC V6N 2H6
      Canada
    President/ CEO, Director Natural Program
      Inc.
    55,000
    
    Owned by BDG Inc. Ms. Groote is a 50% in BDG Inc.
    0.9%Rick
      Walter 3806 W 33rdAve, Vancouver, BC V6N 2H6
      Canada
    Interim President Hagensbo rg Foods Ltd.
    69,000
    
    Owned by BDG Inc. Mr. Walter is a 50% in BDG Inc.
    1.1%Officers
      and Directors as a group (6 individuals)
    
    2,912,032
    
    
    45.7%


Based upon a review of our shareholders list as of June 30,
2003 there are two other registered holders of five percent or more of our
Common Stock.

Name and Address of Beneficial Owner
    Common Stock Ownership (1)
    Percentage of Shares OutstandingAran Asset Management SA Alpenstrasse 11/P.O. box 4010
      CH  6304 Zug, Switzerland   Note: Aran is a holding
      company and holds Garuda shares for various shareholders.
    390,323
    5.8%Channing Investments Corp. 800  1450 Creekside
      Dr. Vancouver, BC V6J 5B3 Attn: Chrissy Doherty
    600,000
    9.9%


23

---

Item 12. Certain Relationships and Related Transactions.

The Company entered into the following transactions with Management
  and related parties during the fiscal year ended June 30, 2003 and as of September
  30, 2003:

|- | We incurred consulting fees of $72,000 to Robin Relph.                                                                                                                                                      
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | We paid consulting fees of $42,000 to Birgit Troy.                                                                                                                                                          
|- | We paid consulting fees of $21,400 to BCG Inc., an
        entity 50% owned by Joyce Groote, President of Natural Program Inc.                                                                              
|- | We issued 25,000 common shares to Robin Relph as
        a recruitment bonus for hiring Joyce Groote.                                                                                                       
|- | We issued 25,000 common shares to BCG Inc., an entity
        50% owned by Joyce Groote, President of Natural Program Inc., as a signing
        bonus to Ms. Groote.                                       
|- | We issued 30,000 common shares to BCG Inc., an entity
        50% owned by Joyce Groote, President of Natural Program Inc., as part
        of Ms. Grootes monthly compensation for the 2003 calendar year.
|- | We issued 5,000 common shares to Farhad Bahrami,
        former President of Hagensborg Foods Ltd., for debt.                                                                                               
|- | We issued 69,000 common shares to BCG Inc., an entity
        50% owned by Rick Walter, as part of Mr. Walters compensation as
        a management consultant to Hagensborg Foods Ltd.                    
|- | We issued 40,000 common shares to John Curry, a former
        director and CFO of Garuda Capital Corp. for $14,838 in outstanding debt.                                                                    

Item 13. Exhibits and Reports**on Form 8-K.**

(a) Exhibits

| | 2.1(1)  | -- | Hagensborg Foods Ltd. Acquisition Agreement      
| | ------- | -- | -------------------------------------------------
| |         |    |                                                  
| | 2.2(1)  | -- | Natural Program Inc. Acquisition Agreement       
| |         |    |                                                  
| | 2.3 (3) | -- | Hagensborg Food Corporation Acquisition Agreement
| |         |    |                                                  
| | 3.1 (2) | -- | Articles of Incorporation                        
| |         |    |                                                  
| | 3.2(1)  | -- | Bylaws                                           
| |         |    |                                                  
| | 3.3(1)  | -- | Articles of Amendment                            
| |         |    |                                                  
| | 11(1)   | -- | Statement RE: Computation of Per Share Earnings  
| |         |    |                                                  
| | 21(1)   | -- | Subsidiaries of the Registrant                   
| |         |    |                                                  
| | 31.1    | -- | Section 302 Certification                        
| |         |    |                                                  
| | 31.2    | -- | Section 302 Certification                        
| |         |    |                                                  
| | 32.1    | -- | Section 906 Certification                        
| |         |    |                                                  
| | 32.2    | -- | Section 906 Certification                        

| |  | 1. | Incorporated by reference from Annual Report on Form
        10KSB filed on or about October 15, 2002              
| |  | -- | -------------------------------------------------------------------------------------------------------------------
| |  |    |                                                                                                                    
| |  | 2. | Incorporated by reference from Form 10-SB registration
        statement SEC File # filed on or about June 29, 2000

24

---

| |  | 3. | Incorporated by reference from Amendment No. 1 to
        the Annual Report on Form 10KSB filed on or about January 21, 2003
| |  | -- | ----------------------------------------------------------------------------------------------------------------------------

Item 14. Principal Accountant Fees And Services

Spicer Jeffries & Co, Certified Public Accountants, are the
Companys independent auditors to examine the financial statements of the
Company for the fiscal year ending June 30, 2003. Spicer Jeffries & Co has
performed the following services and has been paid the following fees for these
fiscal years.

Audit FeesSpicer Jeffries & Co. billed $33,000 for the fiscal year ended June
  30, 2002 audit. In addition, Spicer Jeffries & Co. billed $25,000 for work
  related to the Companys filing of its quarterly 10QSBs and work
  performed in conjunction with its previous 8K filing.

Audit Related FeesSpicer Jeffries & Co was not paid any additional fees for the fiscal
  year ended June 30, 2002 and June 30, 2003 for assurance and related services
  reasonably related to the performance of the audit or review of the Companys
  financial statements.

Tax FeesSpicer Jeffries & Co was not paid any additional fees for the fiscal
  year ended June 30, 2002 and June 30, 2003 for professional services rendered
  for tax compliance, tax advice and tax planning.

Other FeesSpicer Jeffries & Co was paid no other fees for professional services
  during the fiscal years ended June 30, 2002 and June 30, 2003.

25

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SIGNATURES

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

GARUDA CAPITAL CORP.(Registrant)

By: / s / C. Robin RelphC. Robin Relph,
President

Date: October 5, 2005

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

By: / s / C. Robin RelphC. Robin Relph, President
and Director

Date: October 5, 2005

By : / s / Juergen WolfJuergen Wolf, Director

Date: October 5, 2005

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