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


                                   Form 10-KSB

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

     FOR THE FISCAL YEAR ENDED JUNE 30 2002

     Commission file number 0 - 30927

                           GARUDA CAPITAL CORPORATION
                           --------------------------
                 (Name of small business issuer in its charter)


           NEVADA                                        980209053
           ------                                        ---------
State or other jurisdiction of              (I.R.S. Employer Identification No.)
incorporation or organization)


      502 - 1978 Vine Street, Vancouver, BC V6K 4S1, Canada         V6K 4S1
      -----------------------------------------------------         -------
            Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number (604) 233-6453

     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 [ ] 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. $340,937.
                                                         ---------


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.): 1,590,896, September 25, 2002


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 6,049,575 common shares.



<PAGE>



                                     PART I

Item 1. Description of Business.

The business of Garuda Capital Corp.

Garuda Capital Corp, formerly Vanstar Films, Inc., was incorporated under the
laws of the State of Nevada on July 8, 1997. It became a reporting issuer on the
NASD OTCBB in June 2000 and was restructured in February 2002 through a 20:1
roll-back-reverse split of the share capital and the change of its name to
Garuda Capital Corp.

Vanstar Films was organized to establish itself in the film industry. These
efforts were abandoned in September 2001 and since then our sole business has
been to investigate new business opportunities. 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.

Hagensborg Foods Ltd. was acquired 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. (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 $1,000,0000. 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, $100,000 in equipment and $132,679 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.

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.



<PAGE>

Hagensborg is in the business of manufacturing and marketing of gourmet
chocolates and other gourmet foods. Hagensborg serves wholesale and retails
customers both in Canada and the US. All products are directly shipped from
Hagensborg's warehouse in South Granville.


Products of Hagensborg Food Ltd.

Hagensborg manufactures and markets both branded and private label chocolates.
The two main Hagensborg chocolate brands are "Kiss Me" truffle frogs and
"Truffles To Go".

Truffles To Go(R) are manufactured in 8 flavors, Cappuccino, Orange, Mint,
Mocha, Peanut Butter, Milk Chocolate, and Chocolate Eclipse. Truffles To Go(R)
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 who appreciate the superior taste and
texture of European chocolate.

Kiss Me(R) 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. They appreciate the
superior taste and texture of European chocolate.

By an agreement dated April 19, 2002 Hagensborg Foods Ltd. acquired a line of
seafood products including seafood pates and smoked salmon filets and all
related assets from Hagensborg Food Corporation for a purchase price of
US$1,000,000 with consideration of $550,000 cash and an assumption of certain
bank debt totaling $450,000. Hagensborg Food Corporation is a company domiciled
in the U.S. that is in the business of selling, marketing and distributing food
products. In spite of the similar names the two companies have separate
ownership although they have historically had a close relationship in developing
their businesses as they intentionally provided an appearance as one company for
marketing purposes.

Hagensborg seafood pates are marketed in 6 flavours, 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. Hagensborg owns the proprietary recipe and the custom German food
processor, being utilized to produce the pate. This equipment is installed at
St. Jeans, a plant in Nanaimo, BC, which produces the pate on a contract basis
for Hagensborg. Hagensborg seafood pates are considered the market leader in
this product category. Hagensborg's traditional Northwest-style Smoked Salmon
Filets are of the highest quality and come in an award-winning winning box
design.

<PAGE>

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:

An AWMA 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 (pound)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 (winter holidays) 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.

<PAGE>

Competition

Hagensborg can be considered a niche marketer of specialty food products. The
Company's 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 the Company with greater market share and resources.

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

Hagensborg's main promotional activities are:

Trade Shows:
Trade shows are a key forum for meetings with brokers, retail buyers and
distributors. Hagensborg is 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, Hagensborg attends distributor shows such as the
Gourmet Award show for their customers held during summer.


<PAGE>

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

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

Sales Manager Contacts:
Hagensborg's 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's products through the larger retailers means gaining head office
approval then working with each regional division to gain placement in stores.

Product Information:
Hagensborg's 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 the Company's behalf to ensure they have a strong selling story. This is
part of the Sales effort to ensure Hagensborg's brokers and distributors are
educated about the Company's 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's products.

Website:
The Hagensborg website address 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
Hagensborg's 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, Hagensborg is focusing on
its core competency, the production of high quality truffles. The Company is
currently developing new packaging concepts for its 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.



<PAGE>

Market Expansion

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

Hagensborg is currently developing a variety of concepts to attract new markets
for its existing products. One approach is to repackage the Company's high end
truffles to appeal to consumers with higher levels of price sensitivity.
Hagensborg is 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, Hagensborg has been very successful
in launching new products, including its latest introduction "Kiss Me"
chocolates. The main focus of the product development efforts will be placed on
finding products to generate revenue in the historically revenue weak first and
second calendar quarters.

Hagensborg is developing a branded Twin Peak Nougat Bar which has been marketed
in the past as a private label product.


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
Hagensborg's 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 Hagensborg
is currently evaluating new manufacturing equipment to decrease its cost of
production and thereby be able to offer competitive pricing.




<PAGE>

Stated Business Objectives

Hagensborg's major objectives are threefold:

Expand product line - Short-term:
Hagensborg's 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 Hagensborg is seeking to expand
its 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, Hagensborg will 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:
Hagensborg's current manufacturing and warehouse facilities are leased and the
lease agreement will expire in September 2002. The Company is looking to
establish its own state-of-the-art production plant.

History and general development of business of Natural Program Inc.

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

Natural Program is in the business of developing and marketing herbal remedies.
Natural Program operates a Chinese herbal pharmacy to dispense high quality
Chinese herbs to practitioners and markets a whole-sale line of herbal remedies
under the Natural Program name. To date, Natural Program has completed the
development of the first complete product line which is being test marketed in
Vancouver-based health food stores and pharmacies.

Natural Program's main assets are its 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.
Natural Program's products are marketed in the US, Canada and Europe.


Products and services of Natural Program Inc.

Currently, Natural Program's main 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.



<PAGE>

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.


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.



<PAGE>

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 eight-fold 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.


Herbal Laboratories

In addition to the wholesale product lines described above, 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.

The Company carries 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.


<PAGE>

Future Products

In the future, the Company is planning to develop a variety of other natural
health products to satisfy the needs of today's health conscious consumers. Such
products include:

     50+ formulas for men and women which will be designed to promote the health
     of men and women aged 50+;
     Men's line, including remedies for hair loss, weight management, impotence;
     Women's line, including remedies for menopause, PMS, weight management;
     Children's remedies, i.e. Attention Deficit Disorder remedy;
     Natural First Aid Kits and Emergency Kits;
     Allergy remedies;
     Heart remedy;
     Acne remedy;


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 (Source: 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

Natural Program's 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:

o    Already use natural medicine and look for natural, non-habit forming
     remedies to common health problems;

     or

o    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 Natural Program's 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.



<PAGE>

Competition

As a manufacturer and wholesaler of herbal remedies 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.

Natural Program's 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

Natural Program's 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 the Company Natural Program provides extensive
product information and educational seminars to sales personnel in order to
enable them to effectively sell its products. Natural Program also provides
point of purchase displays and informational brochures for end-consumers. In the
future, the Company will advertise in trade publications and attend industry
trade shows.




<PAGE>

Stated business objectives

The Company's major objectives are threefold:

Expand product line - short-term:
The Company's strategic focus is on developing and marketing its existing
products in Canada, the US and Europe as well as expanding its 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 Natural Program is seeking to
expand its 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, the Company Natural Program will hire key sales personnel
in each of its main geographical target markets.

Establish production facility - long-term:
Natural Program currently outsources the manufacturing of its products to
specialized providers. In the long-term, the Company Natural Program is looking
to establish its own production facilities by way of acquiring selected
suppliers. The first step towards in-house production is the acquisition of an
encapsulation machine which will enable the Company Natural Program to sell its
Chinese herbal formulas in easy-to-take capsules.


Employees

-------------------------------------------------------------------------------
                      Administration/    Sales/        Production/     Total
                        Accounting      Marketing      Operations
-------------------------------------------------------------------------------
Garuda Capital Corp.         2              -               -            2
-------------------------------------------------------------------------------
Hagensborg Foods Ltd.        4              1               6           11
-------------------------------------------------------------------------------
Natural Program Inc.         1              -               2            3
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>


Item 2. Description of Property.

----------------------- ----------------------- -------------- ----------------- ----------------------- -------------
Lease Details                  Location          Sq Footage     Monthly lease            Leasor             Expiry
----------------------- ----------------------- -------------- ----------------- ----------------------- -------------
<S>                     <C>                     <C>             <C>              <C>                     <C>
Hagensborg Foods        1576 Rand Avenue,                                        Granville South
                        Vancouver, BC V6P          12,000        C $16,000.00    Business Centre         March 2003
                        3G2, Canada                                   or         Holdings Ltd.
                                                                US $10,300.00    C/O Maple Leaf
                                                                                 Property Management
                                                                                 Third Floor, 100 Park
                                                                                 Royal
                                                                                 West Vancouver, BC
                                                                                 V7T 1A2
----------------------- ----------------------- -------------- ----------------- ----------------------- -------------
Natural Program         102 - 2245 West                                          Oaktree Management
                        Broadway, Vancouver,         800         C$ 1,400.00     23575-124th Avenue,     March 2004
                        BC V6K 2E4, Canada                        US $903.00     Maple Ridge, BC. V2X
                                                                                 4K3
----------------------- ----------------------- -------------- ----------------- ----------------------- -------------
Garuda Capital          502 - 1978 Vine         The Company's head office is currently located in the private
                        Street, Vancouver, BC   residence of C. Robin Relph, President of Garuda Capital Corp. No
                        V6K 4S1                 consideration is being paid to Mr. Relph. A commercial office space
                                                will be leased in due course as needed.
----------------------- ----------------------- ----------------------------------------------------------------------
</TABLE>


<PAGE>


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, 2002.



<PAGE>


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

          (1)  Market Information: Garuda Capital Corporation's common stock is
               traded on the OTC Bulletin Board under the symbol "GRUA". Prior
               to February 20, 2002, the common stock traded under the symbol
               "VSTF". On February 20, 2002, a 20 to 1 reverse split became
               effective.

          (2)  High and Low Bid Prices: The following table sets forth high and
               low bid prices for each fiscal quarter, as reported by the OTCBB,
               for the last two fiscal years. Such quotations represent
               inter-dealer prices without retail mark-ups, mark-downs, or
               commissions and, accordingly, may not represent actual
               transactions.
<TABLE>
<CAPTION>

                             Fiscal 2002                           Fiscal 2001
                  Quarter Ended     High    Low        Quarter Ended       High     Low
                  ----------------- ----   -----       ------------------- ----    ------
                  <S>               <C>    <C>         <C>                 <C>     <C>
                  June 30, 2002     1.01   0.65        June 30, 2001       0.15    0.0475
                  March 31, 2002    1.01   0.35        March 31, 2001      0.08    0.035
                  Dec. 31,  2001    0.05   0.03        Dec. 31, 2000       0.15    0.04
                  Sept. 30, 2001    0.06   0.03        Sept. 30, 2000      0.62    0.30
</TABLE>

          (3)  Security Holders: As of September 20, 2002, we had approximately
               77 holders of record of our common stock. This does not include
               beneficial owners holding common stock in street name. The
               closing price per share on September 20, 2002 was $0.36.

          (4)  Dividend Plans: We have paid no common stock cash dividends and
               have no current plans to do so.

          (5)  Preferred Stock: There are no shares of preferred stock presently
               outstanding. Changes in Securities

During the quarter ended June 30, 2002 we conducted 2 private placements of
common stock. The first in February 2002 was for 1,000,000 shares at $0.10 per
share sold to eigh t investors. The second in May 2002 was for 4,302,000 Units
at $0.50 per Unit sold to twenty-three investors. Each Unit consists of one
common share and one non-transferable three year warrant. Each warrant on
exercise entitles the holder thereof to purchase one additional common share at
a price of US$0.50 per share on or before April 12, 2003, US$0.60 per share on
or before April 12, 2004 and US$0.70 per share year on or before April 12, 2005.

With respect to the sales made, we relied on Section 4(2) of the Securities Act
of 1933, as amended. No advertising or general solicitation was employed in
offering the securities. The securities were offered solely to accredited or
sophisticated investors who were provided all of the current public information
available on the Company.



<PAGE>

Item 6. Management's Discussion and Analysis or 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. ("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, $100,000 in equipment and
$132,679 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.

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. Garuda Ventures Canada Inc. holds any idle working
capital to be invested in marketable securities. The company has no other
assets. Garuda Gold Corporation is currently inactive and has not assets. The
company will be activated as soon as a suitable project has been identified.


Results of Operations Fiscal 2002 vs. Fiscal 2001 - Garuda Capital Corp. on
Consolidated Basis

During the fourth quarter of Fiscal 2002, we began to realize our first revenues
through our newly acquired subsidiaries, Hagensborg Foods Ltd. and Natural
Program Inc.



<PAGE>

We realized total revenues of $340,937 and the net loss for the year ended June
30, 2002 was $258,456. $767,321 has been charged to deficit as a shareholder
distribution as a result of the acquisition of the assets of Hagensborg Food
Corp., described above.


Liquidity and Capital Resources Fiscal 2002 vs. 2001 - 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 2003/2004. 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 as necessary to fund future growth until we operate
above the break-even point. We continually evaluate opportunities to sell
additional equity or debt securities, or obtain credit facilities from lenders
to strengthen our financial position. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders.

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

          1.   A $100,000 private placement in February 2002 in which we issued
               1,000,000 shares of common stock to ten investors at $0.10 per
               share.
          2.   A $2,151,000 private placement in May 2002 in which we issued
               4,302,000 shares of common stock to investors at $0.50 per Unit.
               Each Warrant on exercise entitles the holder to purchase one
               additional common share at a price of US$0.50 per share up to
               April 12, 2003, US$0.60 per share up to April 12, 2004, and
               US$0.70 per share for up to April 12, 2005.

Our current assets at June 30, 2002 include $100,000 in subscription receivable
from a related party which was received by us in July 2002. Our current assets
also include $204,186 in Available for Sale Securities. $100,000 of this amount
is an investment in 500,000 common stock of Voice Mobility International Inc. In
July 2002, we purchased 400,000 additional shares of Voice Mobility
International Inc., for $100,000 from a related party.


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.


In order to be more informative regarding the results of operations and the
liquidity and capital resources , discussion thereof will be separated between
Hagensborg Foods Ltd. and Natural Program Inc.



<PAGE>

Results of Operations Fiscal 2002 vs. Fiscal 2001 - Hagensborg Foods Ltd.

Revenues of $1,493,727 in the fiscal year ended June 30, 2002 were 5% higher
than the $1,421,427 in revenues reported for the fiscal year ended June 30,
2001. The increase was due to the acquisition of the assets of Hagensborg Food
Corporation in April 2002, which included a category of seafood products.
Further discussion of Hagensborg's results of operations is divided into
confectionary products and seafood products.

Confectionary sales for the fiscal year ended June 30, 2002 were $1,422,621
representing a marginal increase of $1,194 over the fiscal year ended June 30,
2001. Our seafood product sales for the fiscal year ended June 30, 2002 were
$71,106. This amount represents sales that occurred between April 2002 and June
30, 2002. We anticipate that this new seafood category will increase our sales
in fiscal 2003.

Gross profit for the year ended June 30, 2002 was $338,066 versus $334,055 in
2001. Gross profit percentage of 22.6% in 2002 was lower versus 23.5% in 2001.
The decrease in gross profit percentage was largely due to lower margins
associated with added shipping costs and broker commissions.

Net loss for the year ended June 30, 2002 was $216,545 versus $144,203 for the
same period in 2001, representing a 50% increase in net losses. The increase in
net loss is primarily due to a $25,000 provision taken for the write-down of
slowing moving packaging inventory, the loss of $19,612 on the sale of
equipment, and a $13,333 expense on the settlement of a lawsuit with a former
employee.

Our sales and marketing costs consist primarily of personnel costs, advertising,
promotions, and tradeshows. Total costs were $99,671 and $122,016 for the fiscal
years ended June 30, 2002 and June 30, 2001 respectively. The decrease of
$22,345 is largely due to a decrease in sales and marketing personnel costs. 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 $252,091 and $201,116 for the fiscal years
ended June 30, 2002 and June 30, 2001, respectively. The additional increase of
$50,975 in general and administrative costs between the two years is largely the
result of an increase of $7,515 in interest and bank charges, $7,554 in bad
debts, and $37,500 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 $124,091 and $94,515 for the fiscal years
ended June 30, 2002 and June 30, 2001, respectively. The increase of $29,576 or
31% between the two fiscal years is primarily due to an increase based on our
premise lease agreement. We anticipate that our premise lease costs will
decrease as we are looking to downsize our production plant to eliminate unused
capacity. Our lease expires March 31, 2003 and the premise owner has offered to
reduce the lease space to our match our needs. We are also actively searching
for new lease premises that may better suit our requirements.



<PAGE>

Our Depreciation costs were $59,146 and $60,611 for the fiscal years ended June
30, 2002 and June 30, 2001 respectively. We do not anticipate that our
depreciation costs will change dramatically in the fiscal 2003.


Liquidity and Capital Resources Fiscal 2002 vs. 2001 - 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 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 for the last four fiscal years 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 2003/2004.

During the fiscal year ended June 30, 2002, our current assets to current
liabilities ratio increased from 0.63 to 1.63. Current assets increased $147,977
from $418,948 to $566,925. This was primarily due to the purchase of assets from
Hagensborg Food Corporation which included $132,679 of inventory.

Noncurrent assets increased by $28,586 net of depreciation during the fiscal
year mainly due to the purchase of $100,000 of equipment used to produce seafood
pates from Hagensborg Food Corporation.

Cash flows used from operations were $238,139 in fiscal year 2002 and $177,371
in 2001. For fiscal year 2002 cash flows used in investing activities included
$107,344 for the purchase of machinery. In fiscal 2001 cash flows used in
investing activities included $14,756 for the purchase of machinery and
equipment.

Cash flows from financing activities were $344,689 in fiscal 2002 and $197,753
in fiscal 2001. Financing activities for the current year included $950,000 in
share subscriptions from our parent company, Garuda Capital Corp. These funds
were in part used to repay $400,000 in convertible debentures plus accumulated
interest payable. The remaining amount was used to fund the purchase of assets
from Hagensborg Food Corporation. Prior to the acquisition by Garuda Capital
Corp. we issued 1,000,000 shares in common stock for the settlement of $66,667
that was due to a shareholder. Subsequent to June 30, 2002 we reorganized our
banking relationship and secured a $250,000 operating line of credit and a
$200,000 long-term loan which was used pay down amounts due to shareholders
including Hagensborg Food Corporation.



<PAGE>

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.

During the latter part of the fiscal year we developed several new products to
complement our current confectionary line of Kiss Me(TM) and Truffles-To-Go(TM)
including:

     1.   A 16 oz assorted truffle tray with 6 different flavors of chocolate
          truffles;
     2.   A 10.5 oz Peaks(TM) bar similar to a Toblerone bar but unique with
          white chocolate on the tips;
     3.   A 1.16 oz 3-piece counter display version of our Kiss Me(TM) chocolate
          frog truffle;
     4.   A 3.3 oz Floral Easter Egg containing ten individually wrapped
          truffles;
     5.   A 4.6 oz box of fourteen individually foil wrapped chocolate hearts;

We are planning to hire two additional sales staff before the end of the
calendar year 2002 to sell our confectionary products as well as our seafood
pates and fillets both in the United States and Canada. We are currently 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, floral shops, and lingerie
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.


<PAGE>

Results of Operations Fiscal 2002 vs. Fiscal 2001 - Natural Program Inc.

Natural Program Inc. is a start-up operation and realized its first revenues
totaling $35,374 in fiscal 2002. Gross profit for the year ended June 2002 was
$6,356. Gross profit percentage was 18%. Net loss for the year ended June 2002
was $8,740.

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. In addition
to our range 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.

During the year, Consulting fees increased from $4,276 in fiscal 2001 to $7,419
in fiscal 2002 or 73%. This increase in mainly due to the necessity for new
product formulations, marketing development and outsourced accounting expenses
as a result of the actual start of our sales operation in July 2001. In the
future, as we implement our growth plans, we anticipate to hire two new
employees to take on sales, marketing and accounting functions which will result
in decreased consulting expenses.

Office and General expenses decreased 80% or $12,823 from $15,943 in fiscal 2001
to $3,120 in fiscal 2002. The higher expenses in 2001 included one-time start up
costs of developing and designing the corporate image of the company and its
products, as well as printing costs for product labels, packaging, and other
marketing material. We anticipate that general and administrative costs will
remain stable over the foreseeable future.

Rent increased $657 in 2002 versus 2001. 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 were stable between 2001 at $1,909 and 2002 at $1,945.

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 2002 vs. 2001 - 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
2003/2004.

During the fiscal year ended June 30, 2002, our current assets to liabilities
ratio decreased from 2.74 to 0.85. Current assets increased $6038 from $24,382
to $30,420. This was primarily due to increased inventory levels to support
sales. Noncurrent assets decreased by $12,390 net of depreciation during the
fiscal year.



<PAGE>

Total liabilities increased from $16,297 in fiscal 2001 to $61,132 in fiscal
2002. This includes $35,731 in current liabilities and $25,401 in long-term
debt. Long-term debt associated with the lease of the company vehicle decreased
from $7,397 to $4,648. In addition, we received a loan from our parent company
of $20,753.

Cash flows used from operations were $15,911 in fiscal year 2002 and $38,684 in
2001. For fiscal year 2002 cash flows used in investing activities included
$4,310 for the purchase of an encapsulation machine and $6,413 bank indebtedness
acquired from the acquisition of Natural Program Ltd. In fiscal 2001 cash flows
used in investing activities included $38,776 for the purchase of machinery and
equipment.

Cash flows from financing activities were $14,778 in fiscal 2002 and $76,898 in
fiscal 2001. Financing activities for the current year included a $15,231 loan
for 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 2002
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


<PAGE>

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.


Item 7. Financial Statements.


================================================================================




                    CONSOLIDATED FINANCIAL STATEMENTS


                    GARUDA CAPITAL CORP.
                    (FORMERLY VANSTAR FILMS, INC.)

                    VANCOUVER, BRITISH COLUMBIA, CANADA

                    JUNE 30, 2002 AND 2001







                    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




================================================================================
<PAGE>








                          INDEPENDENT AUDITORS' REPORT




Board of Directors
Garuda Capital Corp. (formerly Vanstar Films, Inc.)

We have audited the  accompanying  consolidated  balance sheet of Garuda Capital
Corp.  at  June  30,  2002  and  the  statements  of   operations,   changes  in
stockholders'  equity and cash flows for the year 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 audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  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  audit  provides  a
reasonable basis for our opinion.

In our  opinion,  these  consolidated  financial  statements  referred  to above
present  fairly,  in all material  respects,  the  financial  position of Garuda
Capital Corp. at June 30, 2002,  and the results of its  operations and its cash
flows for the year 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.


Denver, Colorado                                     /s/ Spicer, Jeffries & Co.
September 27, 2002






<PAGE>
<TABLE>
<CAPTION>



                                                                                                         2
Garuda Capital Corp.

CONSOLIDATED BALANCE SHEETS


June 30, 2002 and 2001                                                                        (US Dollars)


                                                                                    2002           2001
----------------------------------------------------------------------------------------------------------
<S>                                                                            <C>            <C>
ASSETS

Current
    Cash                                                                       $      --      $       520
    Subscriptions receivable [Note 10]                                             100,000
    Accounts receivable                                                            210,834           --
    Available-for-sale securities                                                  204,186           --
    Inventory, net  [Note 3]                                                       365,989           --
    Prepaid expenses                                                                20,523           --
----------------------------------------------------------------------------------------------------------
    Current assets                                                                 901,532            520
Property and equipment, net  [Note 4]                                              401,826           --
Goodwill (Note 5)                                                                  661,524           --
----------------------------------------------------------------------------------------------------------
                                                                               $ 1,964,882    $       520
==========================================================================================================

LIABILITIES
Current
    Bank indebtedness [Note 7]                                                 $    10,624    $      --
    Accounts payable and accrued expenses                                          363,563         70,750
    Unearned revenue                                                                35,297           --
    Current portion of long term debt [Note 8]                                       3,951           --
----------------------------------------------------------------------------------------------------------
    Current liabilities                                                            413,435         70,750
Long term debt [Note 8]                                                              6,166           --
Amounts due to shareholders [Note 9]                                               432,504           --
----------------------------------------------------------------------------------------------------------
                                                                                   852,105         70,750
SHAREHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $0.001 par value; authorized 10,000,000 (2001: 10,000,000);
     Issued: None                                                                     --             --
Common stock, $0.001 par value; authorized 50,000,000 (2001: 50,000,000);
     Issued: 6,049,575 (2001: 4,951,500)                                             6,050          4,952
Capital in excess of par value                                                   2,359,801        155,799
Translation adjustment                                                               3,340           (344)
Deficit                                                                         (1,256,414)      (230,637)
----------------------------------------------------------------------------------------------------------
                                                                                 1,112,777        (70,230)
----------------------------------------------------------------------------------------------------------
                                                                               $ 1,964,882    $       520
==========================================================================================================

</TABLE>






The accompanying notes are an integral part of these statements.


<PAGE>
                                                                               3
Garuda Capital Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS


Years ended June 30, 2002 and 2001                                  (US Dollars)




                                                            2002         2001
--------------------------------------------------------------------------------
REVENUE

Sales                                                    $ 340,937    $    --

Cost of goods sold                                         343,711         --
--------------------------------------------------------------------------------
                                                            (2,774)        --

EXPENSES

General and administrative                                 237,995       64,333
Depreciation                                                15,908         --
Advertising and promotion                                    6,457         --
--------------------------------------------------------------------------------
                                                           260,360       64,333
--------------------------------------------------------------------------------
Loss before other items                                   (263,134)     (64,333)

Gain on sale of marketable securities                        8,724         --
Loss on sale of equipment                                   (4,046)        --
--------------------------------------------------------------------------------
NET LOSS                                                  (258,456)     (64,333)

COMPREHENSIVE LOSS

Gain from foreign currency translation                       3,684        1,621
--------------------------------------------------------------------------------
NET COMPREHENSIVE LOSS                                   $(254,772)   $ (62,712)
================================================================================

NET LOSS PER COMMON SHARE - BASIC AND FULLY DILUTED      $   (0.52)   $   (0.25)
--------------------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES                   489,595      247,525
--------------------------------------------------------------------------------











The accompanying notes are an integral part of these statements.


<PAGE>
<TABLE>
<CAPTION>



                                                                                                     4
Garuda Capital Corp.

CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY


Years ended June 30, 2002 and 2001                                                        (US Dollars)




-------------------------------------------------------------------------------------------------------
                                         Common Stock          Capital in   Accumulated
                                                               Excess of    Deficit and
                                     Shares       Amount       Par Value        Other         Total
-------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>           <C>           <C>            <C>
Balances, June 30, 2000              247,575   $       248   $   160,503   $  (166,304)   $    (5,553)

Translation adjustment                  --            --            --            (344)          (344)
Net loss                                --            --            --         (64,333)       (64,333)
-------------------------------------------------------------------------------------------------------
                                                                                             (504,486)

Balances, June 30, 2001              247,575           248       160,503      (230,981)       (70,230)

Common stock issued for cash,
  net of offering costs of $46,400 5,302,000         5,302     2,199,298          --        2,204,600
Common stock issued for
   acquisition of Natural
   Program Inc.                      500,000           500          --            --              500
Translation adjustment                  --            --            --           3,684          3,684
Net loss                                --            --            --        (258,456)      (258,456)
Distributions (Note 6)                  --            --            --        (767,321)      (767,321)
-------------------------------------------------------------------------------------------------------
Balances, June 30, 2002            6,049,575   $     6,050   $2,359,301$   (1,253,074)$     1,112,777
=======================================================================================================

</TABLE>













The accompanying notes are an integral part of these statements.



<PAGE>
<TABLE>
<CAPTION>
                                                                                                5
Garuda Capital Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS


Years ended June 30, 2002 and 2001                                                    (US Dollars)




                                                                           2002            2001
--------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>
OPERATIONS
Net loss                                                               $  (258,456)   $   (64,333)
Items not involving cash:
    Depreciation                                                            15,908           --
    Foreign currency translations                                            3,684          1,621
    Loss on sale of equipment                                                4,046           --
    Gain on sale of marketable securities                                   (8,724)          --
Changes in operating assets and liabilities:
    Decrease in accounts receivable                                           (775)          --
    Decrease in prepaid expenses                                            (6,477)          --
    Increase in accounts payable and accrued expenses                      125,305         62,223
    Increase in marketable securities                                     (195,462)          --
    Increase in inventory                                                 (116,812)          --
    Increase in unearned revenue                                            35,297           --
--------------------------------------------------------------------------------------------------
          Net cash used in operating activities                           (402,466)          (489)

FINANCING
Proceeds from issuance of common shares                                  2,104,600           --
Distributions                                                             (767,321)          --
Repayment of long term debt                                                   (757)          --
Decrease in amounts due to shareholders                                    (65,429)          --
--------------------------------------------------------------------------------------------------
          Net cash provided by financing activities                      1,271,093           --

INVESTING
Acquisition of property and equipment                                     (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                           (879,771)          --
--------------------------------------------------------------------------------------------------
Net decrease in cash                                                       (11,144)          (489)

Cash, beginning of year                                                        520          1,009
--------------------------------------------------------------------------------------------------
CASH (BANK INDEBTEDNESS), end of year                                  $   (10,624)   $       520
==================================================================================================

Supplemental disclosure of non-cash financing activities:
      Purchase of stock via subscription receivable                    $   100,000    $      --
                                                                       ===========    ===========

Supplemental disclosure of non-cash investing activities:
      Common stock issued for purchase of subsidiary                   $       500    $      --
                                                                       ===========    ===========

The accompanying notes are an integral part of these statements.

</TABLE>


<PAGE>

Garuda Capital Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Years ended June 30, 2002 and 2001                                  (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, 2002,
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.

For the year ended June 30, 2002,  the Company  incurred a net loss of $258,456.
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.  processes and sells  specialty food
products to wholesale and retail customers in North America. Hagensborg Seafoods
Ltd. processes and sells high-quality seafood products throughout North America.
Natural  Program Inc.  sells  natural  herbal  products to wholesale  and retail
customers  in North  America.  Natural  Program  Ltd.  provides  natural  herbal
medication to wholesale and retail customers in North America.

Approximately  90% of  Hagensborg  Foods  revenues  are derived  from the United
States with the remaining 10%  originating in Canada.  100% of the of Hagensborg
Foods  assets  and  liabilities   originate  in  Canada.  100%  of  the  assets,
liabilities,  and revenues of Natural  Program,  Inc.  originate in Canada.  The
other entities included in the  consolidation are located 100% in Canada.  Their
assets and operations are maintained solely in Canada.

Available-for-sale  securities - The Company has invested in various  securities
classified as  available-for-sale at June 30, 2002. These securities are carried
at market  value,  with  unrealized  gains and  losses  reported  as a  separate
component of shareholders' equity. At June 30, 2002, these securities had a fair
market value of $204,136,  which  approximated their cost basis.  Therefore,  no
unrealized gains or losses were recorded on these securities.

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 the year
ended June 30, 2002 for inventory obsolescence.

Goodwill - Goodwill  represents 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. If impairment exists, the amount is written off, rather
than being  amortized  as previous  standards  required.  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.  Garuda
Capital Corp.



<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued


Years ended June 30, 2002 and 2001                                  (US Dollars)


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

Revenue  recognition  -  Revenue  from  the sale of  products  to  customers  is
recognized at the time goods are shipped.

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.

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. Garuda Capital Corp.



<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued


Years ended June 30, 2002 and 2001                                  (US Dollars)

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.


3.  INVENTORY

--------------------------------------------------------------------------------
                                                      2002             2001
--------------------------------------------------------------------------------
Packaging supplies                             $      202,072                -
Finished goods                                        111,035                -
Raw materials                                          48,641                -
Other supplies                                          4,241                -

--------------------------------------------------------------------------------
                                               $      365,989                -
================================================================================


4.  PROPERTY AND EQUIPMENT


--------------------------------------------------------------------------------
                                                 Accumulated    Net Book Value
                                     Cost       Depreciation    2002       2001
--------------------------------------------------------------------------------
Manufacturing equipment         $   503,659       158,697     344,962       -
Manufacturing tools                  33,328        15,378      17,950       -
Furniture and fixtures               33,176        18,668      14,508       -
Automobile                           15,163         6,140       9,023       -
Computer hardware and software       65,538        57,687       7,851       -
Trademarks                           18,668        13,056       5,612       -
Leasehold improvements               90,938        89,018       1,920       -
--------------------------------------------------------------------------------
                                $   760,470       358,644     401,826       -
================================================================================


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

Hagensborg  Foods Ltd - Effective  April 1, 2002,  the Company  acquired 100% of
Hagensborg  Foods Ltd. for $700,000  (Note 11).  This business  combination  was
accounted for under the purchase method of accounting.

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


<PAGE>


Garuda Capital Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued


Years ended June 30, 2002 and 2001                                  (US Dollars)

5.  BUSINESS COMBINATIONS (continued)


    ----------------------------------------------------------------------------
     Purchase price, net of cash acquired                      $      700,000
    ----------------------------------------------------------------------------

    Allocated as follows:
     Property and equipment                                             283,263
     Working capital acquired                                           251,676
     Capital leases and other debt                                     (496,463)
     Goodwill                                                           661,524
    ----------------------------------------------------------------------------
                                                               $       700,000
    ============================================================================



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 $0.001 per share. (Note 11)

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
    ============================================================================




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

On April 19, 2002, the Company acquired certain 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.  Accordingly  the Company has recorded the  acquisition  at
HFC's  carrying  value of  $232,679,  $100,000  in  equipment  and  $132,679  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.



<PAGE>

Garuda Capital Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued


Years ended June 30, 2002 and 2001                                  (US Dollars)




7.  BANK INDEBTEDNESS
--------------------------------------------------------------------------------

The Company has a demand  credit  facility.  It is  personally  guaranteed  by a
shareholder of the Company. Outstanding advances bear interest at prime plus 2%.


8.  CAPITAL LEASE OBLIGATIONS

--------------------------------------------------------------------------------
Future  minimum  payments and the  obligations  due under capital  leases are as
follows:
--------------------------------------------------------------------------------
                                                          2002             2001
--------------------------------------------------------------------------------
    2003                                           $        5,164            -
    2004                                                    5,164            -
    2005                                                    2,128            -
--------------------------------------------------------------------------------
                                                           12,456            -
Less amount representing interest                          (2,339)           -
--------------------------------------------------------------------------------
                                                           10,117            -
Less current portion                                       (3,951)           -
--------------------------------------------------------------------------------
                                                   $        6,166            -
================================================================================

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



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

Advances due to shareholders are unsecured, non-interest bearing and have no
specific terms of repayment.


10.  STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

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

During the year, 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. Of the 4,300,000 units, 200,000
units were subscribed for (see Note 14).




<PAGE>


Garuda Capital Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued


Years ended June 30, 2002 and 2001                                  (US Dollars)


11.  RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

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

     (a)  As described in Note 5, the Company acquired  Hagensborg Foods Limited
          and Natural Program Inc., which companies had certain shareholders and
          directors in common with the Company.

     (b)  The Company purchased certain assets from Hagensborg Foods Corp. (HFC)
          as  described  in Note 6 for  $1,000,000.  HFC shares  certain  common
          shareholders and directors with the Company.

          Amounts  due to  shareholders  included  $428,006  due to HFC  for the
          acquisition of assets.

          During 2002,  the Company had product  sales of $368,787 in the normal
          course of business and  purchased  $16,672 of packaging  inventory and
          $46,693  of raw  materials  and  finished  goods  from  HFC.  Accounts
          receivable  includes  $31,488  due from HFC in the  normal  course  of
          business.

          During 2002,  the Company  incurred  commission  expense of $46,452 to
          HFC.

     (c)  The Company is owed $100,000 for issued shares from a company  related
          to a director of the Company. (Note 14)

     (d)  The Company  incurred  consulting fees of $20,806 to a director of the
          Company.

     (e)  The  Company  incurred a share  capital  finder's  fee of $15,000 to a
          company owned by a director of the Company.

     (f)  The  Company  incurred a share  capital  finder's  fee of $18,000 to a
          director of the Company.

     (g)  The Company  incurred  consulting  fees of $4,751 to an officer of the
          Company.

     (h)  Accounts  payable  includes  $2,816 due to an officer  for  consulting
          fees.


12. COMMITMENTS
--------------------------------------------------------------------------------

The Company leases certain premises and equipment. Annual minimum lease payments
are due as follows:

         2003                                                $      108,018
         2004                                                        15,408
         2005                                                         9,209
         2006                                                         -
         2007                                                         -
--------------------------------------------------------------------------------
                                                             $      132,635
================================================================================

Rent  expense  for the years  ended June 30,  2002 and 2001 was  $32,664 and $0,
respectively.


<PAGE>

Garuda Capital Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued


Years ended June 30, 2002 and 2001                                  (US Dollars)



13. INCOME TAXES
--------------------------------------------------------------------------------

The Company has a Canadian net  operating  loss  carryforward  of  approximately
US$1,297,000  and a United States net operating loss  carryforward of US$320,000
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  US$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,
2002 and 2001 are as follows:

                                                     2002            2001
--------------------------------------------------------------------------------
Deferred tax liabilities                        $           -    $          -
================================================================================


--------------------------------------------------------------------------------
Deferred tax assets:
     Net operating loss carryforwards           $     692,000    $    461,000
     Valuation allowance                             (692,000)       (461,000)
                                                --------------   ------------
                                                $           -    $          -
================================================================================

The  valuation  allowance  for deferred tax assets was increased by $231,000 and
$61,000 during the years ended June 30, 2002 and 2001, 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
--------------------------------------------------------------------------------
                                                         $   1,297,000
================================================================================

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


14. SUBSEQUENT EVENTS
--------------------------------------------------------------------------------

In  July  2002,  the  Company  received  $100,000  to  settle  the  subscription
receivable due from a company controlled by a director of the Company.

15. 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, 2002.

During the year ended June 30,  2002,  the  Company  had sales to two  customers
representing 25% and 12% of the Company's total revenue.







<PAGE>

Item 8. Changes In and Disagreements With Accountants on Accounting and
        Financial Disclosure. Previous Independent Auditor

On May 15, 2002, Andersen Andersen & Strong, L.C. ("Andersen") resigned as our
independent auditor. Andersen's reports on our financial statements for the
fiscal years ended June 30, 2000 and 2001 did not contain an adverse opinion or
a disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles. The decision to change accountants has
been approved by our board of directors.

For the fiscal years ended June 30, 2000 and 2001and for the period from June
30, 2001 to May 15, 2002 there has been no disagreement between us and Andersen
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.

New Independent Auditor

We have engaged Spicer, Jeffries & Co., Certified Public Accountants of 4155 E.
Jewell Avenue, suite 307, Denver, Colorado 80222 ("Spicer Jeffries")as our new
independent accountants as of May 15, 2002. We have not consulted with Spicer
Jeffries regarding the application of accounting principles, the type of audit
opinion that might be rendered by Spicer Jeffries or any other matter that was
the subject of a disagreement between us and Andersen.



<PAGE>


                                    PART III

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

MANAGEMENT

The executive officers and directors of the Company and their ages are as
follows:

       Name                 Age                      Position
----------------------   ---------   ------------------------------------------

C. Robin Relph              54        President, CEO, Director
John E. Curry               56        Treasurer CFO, Director
G. Arnold Armstrong         74        Chairman, Director
Birgit Schrott              28        Secretary

Farhad Bahrami              34        President, Director, Hagensborg Foods Ltd.
Pascal Roy                  33        President, Director, Natural Program Inc.


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 Crop.

-    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.

<PAGE>

John E. Curry, Director, CFO, Garuda Capital Corp.

-    President of Hydrovane Self Steering Inc. (West Vancouver, Canada) from May
     2002 to present.
-    President of Garuda Capital Corp. (Vancouver, Canada) from September 2001
     to April 2002. Director of Garuda Capital Corp. from September 2001 to
     present.
-    Director of WaveRider Communications Inc. (Tornoto, Canada) from October
     1999 to present.
-    Director of Voice Mobility International Inc. (Vancouver, Canada) from
     August 2001 to February 2002.
-    Partner of Bedford Curry & Co., Chartered Accountants (Vancouver, Canada)
     from 1985 to 1999.


Birgit Schrott, 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.


Farhad Bahrami, CGA, Director, President, Hagensborg Foods Ltd.

-    President and Director of Hagensborg Foods Ltd. from April 2001 to present.
-    President and Director of Hagensborg Food Corporation from April 2001 to
     present.
-    Financial Controller of Voice Mobility International Inc. (Vancouver,
     Canada) from February 1999 to February 2001.
-    Part-time financial consultant to Acrex Ventures Ltd. (Vancouver, Canada)
     from July 2000 to February 2001.
-    Financial Controller of Dunn's Tailors (Vancouver, Canada) from November
     1996 to February 2001.


Pascal Roy, BCom, DTCM, Director & President, Natural Program Ltd.

-    President and Director of Natural Program Ltd. (Vancouver, Canada) from
     July 2000 to present.
-    Director of Natural Program Inc. (Nevada, USA) from July 2000 to present.
-    Director of Barkley Sound Aquaculture (Vancouver, Canada) from May 2002 to
     present.
-    Private practice, Doctor of Traditional Chinese Medicine, (Vancouver,
     Canada) from 1998 to present.



<PAGE>

Compliance with Section 16(a) of Securities Exchange Act of 1934

To our knowledge, during the fiscal year ended June 30, 2002, our Directors and
Officers failed to timely comply with Section 16(a) filing requirements in that
Forms 3 for the Directors and Officers were not timely filed. The Forms 3 for
the Directors and Officers were filed on September 27, 2002. This statement is
based solely on a review of the copies of such reports furnished to us by our
Directors and Officers and their written representations that such reports
accurately reflect all reportable transactions.

Family Relationships

There is no family relationship between any Director, executive or person
nominated or chosen by the Company 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, 2002, the
compensation awarded or paid by the Company to its Chief Executive Officer and
any of the executive officers of the Company whose total salary and bonus
exceeded $100,000 during such year (The "Named Executive Officers"):
<TABLE>
<CAPTION>

 --------------------------------------------------------------------------------------------------------------------
                                             SUMMARY COMPENSATION TABLE
 --------------------------------------------------------------------------------------------------------------------
                                                                                   Long Term Compensation
 --------------------------------------------------------------------------------------------------------------------
                                    Annual Compensation                         Awards               Payouts
 --------------------------------------------------------------------------------------------------------------------
      Name and                                         Other Annual     Securities Underlying       All Other
 Principle Position       Year        Salary ($)     Compensation ($)       Options (#)         Compensation ($)
 --------------------------------------------------------------------------------------------------------------------
 <S>                 <C>              <C>            <C>                <C>                     <C>
   C. Robin Relph,        2002          $6,000              0                     0                     0
      President    (starting May 02)
 --------------------------------------------------------------------------------------------------------------------
    John E. Curry    Sept. 2001 to         0                0                     0                     0
                       April 2002
 --------------------------------------------------------------------------------------------------------------------
    Louis Tardiff     Inception to         0                0                     0                     0
                       Sept. 2001
 --------------------------------------------------------------------------------------------------------------------
</TABLE>


The Company has omitted charts regarding the number and value of options granted
to or exercised by executive officers during the past three fiscal years as no
options have been granted to the executive officers as of September 30, 2002.



<PAGE>

Employment Agreements and Executive Compensation

There are 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 $ 36, 000 per year.

The following other consulting fees have been paid: John Curry, CFO, January to
June 2002 US $12,000.

The following amounts were paid out as finders fees to our affiliates in our
Private Placements:

Buckingham Securities Ltd.(1)                        US $ 15,000.00
Robin Relph                                          US $ 18,000.00
Kroger Pacific Ltd. (2)                              US $ 10,800.00

(1)  Robin Relph is a director and principal shareholder of Buckingham
     Securities Ltd.
(2)  Unrelated party.

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 the Company, or from a change in the
control of the Company.

Transactions with Management
The Company entered into the following transactions with Management and related
parties during the fiscal year ended June 30, 2002 and as of October 14, 2002:

-    C. Robin Relph, President and Director, participated in the February 2002
     and May 2002 Private Placements at the same terms as all other investors
     and purchased 100,000 common shares and 111,800 units respectively. In
     addition, entities to which Mr. Relph is a control person purchased
     1,110,000 shares and 427,200 units respectively.

-    Birgit Schrott, Corporate Secretary, participated in the February 2002
     Private Placement at the same terms as all other investors and purchased
     50,000 common shares.

-    G. Arnold Armstrong, a Director through two entities of which he is a
     control person participated in the February 2002 Private Placement at the
     same terms as all other investors and purchased 700,000 common shares.



<PAGE>

-    As part of the acquisition of Natural Program Inc. Pascal Roy, Director of
     Natural Program Inc., in April 2002, received 80,645 common shares in
     consideration for his shares in Natural Program Inc.

-    In April 2002, the Company acquired Hagensborg Foods Limited and Natural
     Program Inc., which, companies had certain shareholders and directors in
     common with the Company. Robin Relph is a shareholder and Director in
     Hagensborg Foods Limited as well as Natural Program Inc. Birgit Schrott is
     a Director of Natural Program Inc.

-    In April 2002, our subsidiary Hagensborg Foods Ltd. purchased certain
     assets from Hagensborg Foods Corp. (HFC) $1,000,000. HFC shares certain
     common shareholders and directors with the Company. Robin Relph is a
     Director and shareholder in HFC.

-    The Company incurred consulting fees of $20,806 to Robin Relph, a director
     of the Company.

-    The Company incurred a share capital finder's fee of $15,000 to a company
     owned by Robin Relph, a director of the Company.

-    The Company incurred a share capital finder's fee of $18,000 to Robin
     Relph, a director of the Company.

-    The Company incurred consulting fees of $4,751 to Birgit Schrott, an
     officer of the Company.

-    Accounts payable includes $2,816 due to John Curry, an officer for
     consulting fees.

-    In July 2002, the Company purchased 400,000 shares of Voice Mobility
     International Inc., for $100,000 from Garuda Ventures Limited, an entity of
     which Mr. Relph is a control person.









<PAGE>


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

The following table sets forth the number of shares of the Company's Common
Stock beneficially owned as of September 20, 2002 by individual directors and
executive officers and by all directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
 Name and Address of                                            Common Stock                            Percentage
   Beneficial Owner           Title                               Ownership                              of Shares
                                                                                                        Outstanding
---------------------------------------------------------------------------------------------------------------------
<S>                        <C>                <C>                                                       <C>
C. Robin Relph             President,         278,574  Directly owned by Mr. Relph
#4, Arbour Island          Director           435,200  Owned by Buckingham Securities Limited,
Old Fort Bay                                           Mr. Relph is Managing Director and 60%
New Providence                                         shareholder.
Bahamas                                        86,000  Owned by Hagensborg Food Corp., Mr. Relph
                                                       is a Director and minority shareholder in
                                                       Hagensborg Food Corp.
                                              582,258  Owned by Garuda Ventures Ltd., Mr. Relph
                                                       is a Director of the company. He disclaims
                                                       any beneficial ownership in these shares;
                                                       Owned by Garuda Holdings Ltd.,  Mr. Relph
                                              200,000  is a Director of the company. Mr. Relph
                                                       disclaims any beneficial ownership in
                                                       these shares;
                                                       Owned by Rigpa Foundation, a charitable
                                              192,000  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
                                              300,000  is a Director of the company. He disclaims
                                                       any beneficial ownership in these shares;

                                          -----------
                                            2,047,032                                                      33.8%
---------------------------------------------------------------------------------------------------------------------
Pascal Roy                 Director,           80,645                                                      1.3%
#3 - 2285 W. 10th Ave.     Natural
Vancouver, BC V6K 2J1      Program
Canada                     Inc.
                           President,
                           Natural
                           Program
                           Ltd.
---------------------------------------------------------------------------------------------------------------------
Birgit Schrott             Secretary           50,000                                                      0.8%
1843 West 4th Avenue
Vancouver, BC V6J 1M4
Canada
---------------------------------------------------------------------------------------------------------------------
John Curry                 Director,                0                                                        0
#15 - 636 Clyde Avenue     CFO
West Vancouver, BC
Canada    V7T 1E1
---------------------------------------------------------------------------------------------------------------------

<PAGE>


Arnold Armstrong           Director,          600,000  Owned by International Cetec Investments
480-650 W. Georgia St.     Chairman                    Inc., Mr. Armstrong is Chairman of this
Vancouver,  B.C.                                       company.
Canada, V6B 4N9                               100,000  Owned by Sentarn Enterprises. Mr.
                                                       Armstrong owns 67% of Celvin Grove Estates
                                                       Ltd. which owns 100% of Sentarn
                                                       Enterprises Ltd.
                                          -----------
                                              700,000                                                      11.6%
---------------------------------------------------------------------------------------------------------------------
Farhad Bahrami             President,                                       0                                0
1576 Rand Avenue           Director
Vancouver, BC V6P 3G2      Hagensborg
                           Foods Ltd.
---------------------------------------------------------------------------------------------------------------------
Officers and                               2,877,677                                                       47.5%
Directors as a group
(6 individuals)
---------------------------------------------------------------------------------------------------------------------

</TABLE>


Based upon a review of the Company's shareholders list as of September 20, 2002
there are two other registered holders of five percent or more of the Company's
Common Stock.


--------------------------------------------------------------------------------
     Name and Address of                 Common Stock     Percentage of Shares
      Beneficial Owner                   Ownership (1)         Outstanding
--------------------------------------------------------------------------------
Aran Asset Management SA                  350,000               5.8%
Alpenstrasse 11/P.O. box 4010
CH - 6304 Zug
Switzerland
Attn: Michael C. Thalmann
--------------------------------------------------------------------------------
Channing Investments Corp.                600,000               9.9%
800 - 1450 Creekside Dr.
Vancouver,  BC V6J 5B3
Attn: Chrissy Doherty
--------------------------------------------------------------------------------

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, 2002 and as of October 14, 2002:

-    C. Robin Relph, President and Director, participated in the February 2002
     and May 2002 Private Placements at the same terms as all other investors
     and purchased 100,000 common shares and 111,800 units respectively. In
     addition, entities to which Mr. Relph is a control person purchased
     1,110,000 shares and 427,200 units respectively.



<PAGE>

-    Birgit Schrott, Corporate Secretary, participated in the February 2002
     Private Placement at the same terms as all other investors and purchased
     50,000 common shares.

-    G. Arnold Armstrong, a Director through two entities of which he is a
     control person participated in the February 2002 Private Placement at the
     same terms as all other investors and purchased 700,000 common shares

-    As part of the acquisition of Natural Program Inc. Pascal Roy, Director of
     Natural Program Inc., in April 2002, received 80,645 common shares in
     consideration for his shares in Natural Program Inc.

-    In April 2002, the Company acquired Hagensborg Foods Limited and Natural
     Program Inc., which, companies had certain shareholders and directors in
     common with the Company. Robin Relph is a shareholder and Director in
     Hagensborg Foods Limited as well as Natural Program Inc. Birgit Schrott is
     a Director of Natural Program Inc.

-    In April 2002, our subsidiary Hagensborg Foods Ltd. purchased certain
     assets from Hagensborg Foods Corp. (HFC) $1,000,000. HFC shares certain
     common shareholders and directors with the Company. Robin Relph is a
     Director and shareholder in HFC.

-    The Company incurred consulting fees of $20,806 to Robin Relph, a director
     of the Company.

-    The Company incurred a share capital finder's fee of $15,000 to a company
     owned by Robin Relph, a director of the Company.

-    The Company incurred a share capital finder's fee of $18,000 to Robin
     Relph, a director of the Company.

-    The Company incurred consulting fees of $4,751 to Birgit Schrott, an
     officer of the Company.

-    Accounts payable includes $2,816 due to John Curry, an officer for
     consulting fees.

-    In July 2002, the Company purchased 400,000 shares of Voice Mobility
     International Inc., for $100,000 from Garuda Ventures Limited, an entity of
     which Mr. Relph is a control person.


<PAGE>

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

(a)  Exhibits

2.1      --       Hagensborg Foods Ltd. Acquisition Agreement
2.2      --       Natural Program Inc. Acquisition Agreement
3.1 (1)  --       Articles of Incorporation
3.2      --       Bylaws

3.3      --       Articles of Amendment

11       --       Statement RE: Computation of Per Share Earnings

21       --       Subsidiaries of the Registrant

1.   Incorporated by reference from Form 10-SB registration statement SEC File #
     filed on or about June 29, 2000

          (b)  Reports on Form 8-K: The Company filed the following reports on
               Form 8-K during the last quarter of the fiscal year ended June
               30, 2002

1.   June 16, 2002 Amendment to the Report on Form 8-K filed on May 1, 2002
     announcing the acquisition by Garuda Capital Corp. of all the outstanding
     shares of Hagensborg Foods Ltd. and Natural Program Inc., attaching the
     audited financial statements of Hagensborg Foods Ltd. for the period ended
     June 30, 2000 and June 30, 2001, the audited financial statements of
     Natural Program Ltd. for the period ended June 30, 2001 and the pro forma
     financial statements for Garuda Capital Corp. as at March 31, 2002 giving
     effect to the purchases as if they had occurred on July 1, 2000.

2.   June 12, 2002 Amendment to the Report on Form 8-K filed on May 15, 2002
     announcing the change in the Registrant's auditors.

3.   May 15, 2002 Report on Form 8-K announcing the change in the Registrant's
     auditors.

4.   May 1, 2002 Report on Form 8-K announcing the appointment of Robin Relph
     and Arnold Armstrong to the Company's Board of Directors.


<PAGE>


                                   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 Relph
                                       ----------------------------------
                                       C. Robin Relph, President

                                       Date: October 14, 2002
                                             ----------------

                                     By: / s / John E. Curry
                                       ----------------------------------
                                       John E. Curry, CFO

                                       Date: October 14, 2002
                                             ----------------

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 Relph
                                       ----------------------------------
                                       C. Robin Relph, President and Director

                                       Date: October 14, 2002
                                             ----------------

                                     By: / s / G. Arnold Armstrong
                                       ----------------------------------
                                     G. ARNOLD ARMSTRONG, Director


                                       Date: October 14, 2002
                                             ----------------

                                     By: / s / John E. Curry
                                       ----------------------------------
                                       John E. Curry, CFO and Director

                                       Date: October 14, 2002
                                             ----------------


<PAGE>



        Certification of Principal Executive Officer Regarding Facts and
                 Circumstances Relating to Exchange Act Filings


I, C. Robin Relph, certify that:

     1. I have read this annual report on Form 10-KSB of Garuda Capital Corp.;

     2. To my knowledge, the information in this report is true in all important
respects as of June 30, 2002; and

     3. This report contains all information about the company of which I am
aware that I believe is important to a reasonable investor, in light of the
subjects required to be addressed in this report, as of June 30, 2002.

     For purposes of this certification, information is "important to a
reasonable investor" if:


          (a) There is a substantial likelihood that a reasonable investor would
     view the information as significantly altering the total mix of information
     in the report; and

          (b) The report would be misleading to a reasonable investor if the
     information is omitted from the report.


BY:   /s/ C. Robin Relph                             Subscribed and sworn to
      -----------------------------------            before me this 10 day of
      C. Robin Relph, President and C.E.O.           October, 2002
      (Principal Executive Officer)

DATE: October 10, 2002
      ------------------                             /s/ G. Arnold Armstrong
                                                     -------------------------

                                                     Notary Public in and
                                                     for the Province of
                                                     British Columbia.

                                                     My Commission Expires:

                                                     At the pleasure of the
                                                     queen of England.

                                                              [Seal]



<PAGE>


        Certification of Principal Financial Officer Regarding Facts and
                 Circumstances Relating to Exchange Act Filings


I, John E. Curry, certify that:

     1. I have read this annual report on Form 10-KSB of Garuda Capital Corp.;

     2. To my knowledge, the information in this report is true in all important
respects as of June 30, 2002; and

     3. This report contains all information about the company of which I am
aware that I believe is important to a reasonable investor, in light of the
subjects required to be addressed in this report, as of June 30, 2002.

     For purposes of this certification, information is "important to a
reasonable investor" if:


          (a) There is a substantial likelihood that a reasonable investor would
     view the information as significantly altering the total mix of information
     in the report; and

          (b) The report would be misleading to a reasonable investor if the
     information is omitted from the report.


BY:   /s/ John E. Curry                              Subscribed and sworn to
      -----------------------------------            before me this 10 day of
      John E. Curry, President and C.E.O.            October, 2002
      (Principal Executive Officer)

DATE: October 10, 2002
      ------------------                             /s/ G. Arnold Armstrong
                                                     -------------------------

                                                     Notary Public in and
                                                     for the Province of
                                                     British Columbia.

                                                     My Commission Expires:

                                                     At the pleasure of the
                                                     queen of England.

                                                              [Seal]