<PAGE>

                United States Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

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

     For the fiscal year ended December 31, 2005.

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

     For the transition period from ___________ to ___________.

                        Commission file number: 0-25679

                       FIRST AMERICAN CAPITAL CORPORATION
                 (Name of small business issuer in its charter)

<TABLE>
<S>                                      <C>
         Kansas                                         48-1187574
(State of incorporation)                 (I.R.S. Employer Identification Number)
</TABLE>

                 1303 SW First American Place, Topeka, KS 66604
                    (Address of principal executive offices)

                    Issuer's telephone number (785) 267-7077

                  Securities registered under 12(b) of the Act:
                               Title of Each Class
                                      NONE

              Securities registered under Section 12(g) of the Act:
                               Title of Each Class
                          Common Stock, $.10 Par Value

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
periods that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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: $4,860,502

State the aggregate market value of the voting equity held by non-affiliates:

Of the 4,257,057 shares of common stock of the registrant issued and outstanding
as of March 16, 2006, 3,886,857 shares are held by non-affiliates. Because of
the absence of an established trading market for the common stock, the
registrant is unable to calculate the aggregate market value of the voting stock
held by non-affiliates as of a specified date within the past 60 days.

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

Common Stock, $.10 Par Value - 4,257,057 shares as of March 16, 2006.

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


                                       1

<PAGE>

                                  FORM 10-KSB
                   For the Fiscal Year Ended December 31, 2005

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Part I.
Item  1.  Description of Business........................................     3
Item  2.  Description of Property........................................     8
Item  3.  Legal Proceedings..............................................     9
Item  4.  Submission of Matters to a Vote of Security Holders............     9

Part II.
Item  5.  Market for Common Equity and Related Stockholder Matters.......     9
Item  6.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations......................................    10
Item  7.  Financial Statements...........................................    16
Item  8.  Changes In and Disagreements With Accountants on Accounting
          and Financial Disclosure.......................................    16
Item  8a. Controls and Procedures........................................    17

Part III.
Item  9.  Directors, Executive Officers, Promoters and Control Persons;
          Compliance With Section 16(a) of the Exchange Act..............    17
Item 10.  Executive Compensation.........................................    21
Item 11.  Security Ownership of Certain Beneficial Owners and
          Management.....................................................    22
Item 12.  Certain Relationships and Related Transactions.................    23
Item 13.  Exhibits and Reports on Form 8-K...............................    24
Item 14.  Principal Accountant Fees and Services.........................    26
Signatures...............................................................    27
</TABLE>


                                       2

<PAGE>

PART I

Item 1. Description of Business

First American Capital Corporation (the "Company") was incorporated on July 10,
1996 for the purpose of forming, owning and managing life insurance companies.
The Company sold 2,120,000 shares at $.10 per share to its organizing
shareholders in August of 1996 for total proceeds of $212,000. Also, in
September, 1996, the Company sold 600,000 shares of its common stock for $1.00
per share in a separate private placement. The initial capital was used to fund
the Company's efforts to register a $12,500,000 intra-state public offering with
the Office of the Kansas Securities Commissioner.

On January 11, 1999, the Company completed the intra-state public stock offering
raising approximately $13,750,000 of capital by selling 2,750,000 shares of
common stock at $5.00 per share. These funds were used to capitalize the life
insurance company, purchase and develop real estate assets and fund operations.

First American Capital Corporation

The primary segment of the Company's operations is life insurance and annuities.
Accordingly, a significant portion of revenue will be generated by the Company's
wholly owned life insurance subsidiary, First Life America Corporation ("FLAC").
Additional income is provided in the form of investment and rental income. The
Company has contracted with FLAC to provide services, which are incident to the
operations of FLAC, as discussed below. The Service Agreement between the
Company and FLAC ("Service Agreement") was amended and restated effective
January 1, 2002.

First Life America Corporation

On October 15, 1997, FLAC received a certificate of authority from the Kansas
Insurance Department ("KID") to transact its life insurance and annuity business
in the state of Kansas. On November 19, 1998, life insurance operations
commenced. Under the provisions of accounting principles generally accepted in
the United States of America, FLAC had $6,490,251 of shareholders' equity as of
December 31, 2005, and is wholly owned by the Company.

First Life Brokerage, Inc.

Effective June 29, 2005, the Company formed and capitalized First Life
Brokerage, Inc. ("FLBI"). FLBI was capitalized with $25,000 and is a direct
subsidiary of the Company. FLBI operates as a licensed insurance agency,
offering life, health, disability, and annuity products underwritten by other
insurance companies. FLBI's strategy is to make use of the Company's existing
infrastructure, equipment and personnel by selling other companies' insurance
products to the Company's shareholders, FLAC policyholders and the general
public. FLBI will also solicit business from independent agents who may need
specialized coverage or service offered through FLBI and its insurance contacts.
Income will be derived from commissions and fees generated through the sale of
insurance products. Although much work has been done to create FLBI and lay a
foundation for future growth, the sale of products and recruiting of agents is
only beginning. Income received in 2005 was negligible and management is not
projecting that FLBI will contribute significantly to the Company's financial
results in 2006. FLBI has secured appointment contracts with several well-known
insurance companies and is licensed to transact business in four states.

Administration

Under the terms of the Service Agreement, the Company provides personnel,
facilities, and services incident to the operations of FLAC. FLAC does not have
any employees. Services performed pursuant to the Service Agreement are
underwriting, claim processing, accounting, policy administration and data
processing and other services necessary for FLAC to operate. The Service
Agreement is effective until either party provides 90 days written notice of
termination. FLAC pays fees equal to the Company's cost of providing such
services, including an appropriate allocation of the Company's overhead
expenses, in accordance with accounting principles generally accepted in the
United States of America. FLAC bears all of its direct selling costs, which
include agent recruiting, training and licensing; agent commissions; any
benefits or awards directly for or to agents or management including any life or
health insurance to be provided; and any taxes (federal, state or county)
directly related to the business of FLAC. Additionally, FLAC is


                                       3

<PAGE>

responsible for, among other things, any reinsurance premiums; legal expenses
related to settlement of claims; state examination fees; interest on
indebtedness; costs related to mergers or acquisitions and costs related to
fulfilling obligations of the life insurance and annuity contracts written by
the agents of FLAC.

Actuarial Services

On behalf of FLAC, the Company has retained the services of Miller & Newberg
Inc., consulting actuaries located in Olathe, Kansas. Mr. Eric Newberg of Miller
& Newberg Inc. has been appointed by the Board of Directors of FLAC to act as
its valuation and illustration actuary.

Products of FLAC

The primary insurance products currently being marketed by FLAC are as follows:

Golden Eagle Whole Life (Final Expense) is available on a simplified issue or
graded death benefit basis. The simplified issue product is issued from age 50
to 85 with death benefit coverage ranging from a minimum of $2,500 to a maximum
of $25,000. The graded death benefit product is issued from age 50 to 80 with
death benefit coverage ranging from a minimum of $2,000 to a maximum of $10,000.
The policy includes a living benefit rider that pays the actuarial present value
of death benefit upon terminal illness or nursing home confinement. Premiums are
level for life and vary by risk class, sex and issue age.

First Whole Life is a permanent whole life insurance product with guaranteed
level premiums and death benefits. Issue ages are 0 to 80. Rate classes include
preferred non-tobacco, non-tobacco and tobacco. The product is
non-participating. Available riders include accidental death, accelerated living
benefit, waiver of premium, terminal illness and long-term care.

First Term is a level term life insurance product for issue ages 18 to 60. Term
periods are 10, 15, 20 and 30 years. Both fully guaranteed and partially
guaranteed premium options are available. For the partially guaranteed option,
premiums are level for 5 years on the 10 year term, 10 years on the 15 year
term, 13 years on the 20 year term and 17 years on the 30 year term, increasing
annually thereafter. Rate classes include non-tobacco, preferred tobacco and
tobacco. Available riders include return of premium, accidental death,
accelerated living benefit and waiver of premium.

Value Builder is a modified payment whole life insurance policy with a flexible
premium deferred annuity rider. The policy requires premium payments to be made
for a certain number of years after which time the policyholder is entitled to
policy benefits without making future payments. The product combines both a ten
and twenty payment period based on the issue age of the insured. Issue ages from
age 0 (30 days) to 20 and 66 to 80 are ten pay policies and issue ages from 21
to 65 are twenty pay policies. Premium payments are split between life and
annuity based on percentages established in the product design. First year
premium payments are allocated 100% to life insurance and renewal payments are
split 50% to life and 50% to annuity. The product is being sold in premium units
with the ability to purchase either fractional or multiple units. At the end of
the required premium paying period, the policyholder may continue to make full
premium payments into the annuity rider to provide for greater annuity
accumulations.

First Step is a juvenile term product issued from age 0 (30 days) to age 15.
Coverage is sold in units. One unit, consisting of a single premium payment of
$100 purchases $5,000 of death benefit coverage, while two units, consisting of
a single premium payment of $200 purchases $10,000 of coverage. The product
contains a conversion provision allowing it to be converted to a whole life
policy prior to age 21.

First FLEX I is a flexible premium deferred annuity for ages 0 to 90. The
initial interest rate is guaranteed for one contract year with a minimum
guaranteed interest rate of 3%. The surrender charge period is seven years and
up to 15% of the account value can be withdrawn each year without incurring a
surrender charge. If the annuitant becomes confined to a nursing home, the
surrender charge may be waived up to a certain limit. The minimum deposit is
$100.


                                       4

<PAGE>

First MAX I is a single premium deferred annuity for ages 0 to 90. The initial
interest rate is guaranteed for one contract year with a minimum guaranteed
interest rate of 3%. The surrender charge period is five years and up to 15% of
the account value can be withdrawn each year without incurring a surrender
charge. If the annuitant becomes confined to a nursing home, the surrender
charge may be waived up to a certain limit. The minimum deposit is $500.

First MAX III is a single premium deferred annuity for ages 0 to 90. The initial
interest rate is guaranteed for three contract years with a minimum guaranteed
interest rate of 3%. The surrender charge period is three years. If the
annuitant becomes confined to a nursing home, the surrender charge may be waived
up to a certain limit. The minimum deposit is $500.

Easy Pack contains short form applications for simplified underwriting and quick
issue. Products included in the Easy Pack are First Whole Life, First Term,
First Step, Golden Eagle Final Expense and First Flex I, First Max I and First
Max III. The Easy Pack is designed for the agent and consumer to receive quick
underwriting decisions on the small face policies.

Product Marketing and Sales

The Company's marketing strategy is to work with FLAC to provide life insurance
and annuity products that are beneficial to the consumer and profitable for the
Company and its shareholders. As such, FLAC is continually seeking new markets
for its products. FLAC sells its products through independent agents. The
independent agents receive commissions from FLAC based on premiums collected on
the products sold by the independent agents. FLAC contracts the independent
agents directly or through independent marketing organizations, referred to as
IMOs. IMOs generally are organizations that align multiple independent agents
with specific insurers and products. The IMOs receive a portion of the overall
commissions paid by FLAC on products sold by the agents. The IMOs recruit,
train, contract and provide other support functions to the independent agents.

FLAC is currently licensed to transact life and annuity business in the states
of Kansas, Texas, Illinois, Oklahoma, North Dakota, Kentucky and Nebraska. Due
to the varied processes of obtaining admission to write business in new states,
management cannot reasonably estimate the time frame of expanding its marketing
presence.

FLAC was previously licensed to transact business in the state of Ohio. FLAC's
license in Ohio was suspended during the fourth quarter of 2005. The suspension
resulted from FLAC's statutory basis capital and surplus as of September 30,
2005 of $2,495,616 being less than the minimum required level in Ohio of
$2,500,000. As of December 31, 2005, FLAC's statutory basis capital and surplus
was $2,724,980, which is in excess of the aforementioned minimum requirement.
FLAC has appealed the suspension and expects to have its license reinstated in
2006.

Insurance Inforce

The following table provides certain information about FLAC's volume of life
insurance coverage inforce for each of the last three years:

Amounts of Insurance (1)

<TABLE>
<CAPTION>
                                       (shown in thousands)
                                 -------------------------------
                                    2005       2004       2003
                                 ---------   --------   --------
<S>                              <C>         <C>        <C>
Beginning of year                $160,123    $163,424   $154,577
Issued during year                 26,306      16,854     32,877
Reinsurance assumed                 1,096       3,169      6,360
Revived during year                 2,147         694        427
Lapse, surrender and decreased    (26,319)    (24,018)   (30,817)
                                 --------    --------   --------
In-force end of year             $163,353    $160,123   $163,424
                                 ========    ========   ========
</TABLE>

(1)  Excludes accidental death benefits (shown in thousands) of $33,235,
     $35,695, and $36,920 in 2005, 2004, and 2003, respectively.


                                       5
<PAGE>

The following table provides certain information about FLAC's policy count for
each of the last three years:

<TABLE>
<CAPTION>
                                  (Number of Policies)
                                 ----------------------
                                  2005     2004    2003
                                 ------   -----   -----
<S>                              <C>      <C>     <C>
Beginning of year                 8,318   6,582   4,927
Issued during year                2,516   1,676   2,239
Reinsurance assumed                  55     726      --
Revived during year                 110      50      27
Lapse, surrender and decreased   (1,143)   (716)   (611)
                                  -----   -----   -----
In-force end of year              9,856   8,318   6,582
                                  =====   =====   =====
</TABLE>

As is evidenced by the tables above, the average face amount per policy issued
has ranged from approximately $15,000 in 2003 to approximately $10,000 in 2004
and 2005. The relatively small face amount issued is directly related to
increased focus being placed on production of the Company's Final Expense
product over the past three years. The Final Expense product has a maximum face
amount of $25,000, a level significantly less than the other products
historically marketed by the Company.

Reinsurance

In order to reduce the financial exposure to adverse underwriting results,
insurance companies generally reinsure a portion of their risks with other
insurance companies. FLAC has entered into agreements with Generali USA Life
Reassurance Company ("Generali") of Kansas City, Missouri, Optimum Re Insurance
Company ("Optimum Re") of Dallas, Texas, and Wilton Reassurance Company ("Wilton
Re") of Wilton, CT, to reinsure portions of the life insurance risks it
underwrites. Pursuant to the terms of the reinsurance agreements, FLAC retains a
maximum coverage exposure of $50,000 on any one insured. In the event that the
reinsurance companies are unable to fulfill their obligations under the
reinsurance agreements, FLAC remains primarily liable for the entire amount at
risk.

FLAC is party to an Automatic Retrocession Pool Agreement (the "Reinsurance
Pool") with Optimum Re, Catholic Order of Foresters, American Home Life
Insurance Company and Woodmen of the World. The agreement provides for automatic
retrocession of coverage in excess of Optimum Re's retention on business ceded
to Optimum Re by the other parties to the Reinsurance Pool. FLAC's maximum
exposure on any one insured under the Reinsurance Pool is $50,000.

Underwriting

FLAC follows underwriting procedures designed to assess and quantify insurance
risks before issuing life insurance policies. Such procedures require medical
examinations (including blood tests, where permitted) of applicants for policies
of life insurance in excess of certain policy limits. These requirements are
graduated according to the applicant's age and vary by policy type. The life
insurance subsidiary also relies upon medical records and upon each applicant's
written application for insurance, which is generally prepared under the
supervision of a trained agent.

Investments

The Kansas Insurance Code restricts the investments of insurance companies by
the type of investment, the amount that an insurance company may invest in one
type of investment, and the amount that an insurance company may invest in the
securities of any one issuer. The restrictions of the Kansas Insurance Code are
not expected to have a material effect on the investment return of FLAC. The
Company is not subject to the limitations, which restrict the investments made
by FLAC. Currently, investments of FLAC are held in both short-term, highly
liquid securities and long-term, higher yield securities. FLAC implemented a new
investment strategy in 2004. The new strategy is focused primarily on matching
maturities to the anticipated cash needs of FLAC, but also attempts to match the
investment mix to others within FLAC's industry peer group.


                                        6

<PAGE>

Competition

The life insurance industry is extremely competitive. There are a large number
of insurance companies that are substantially larger, have greater financial
resources, offer more diversified product lines and have larger selling
organizations and customer bases than FLAC. Competition also is encountered from
the expanding number of banks and other financial intermediaries that offer
competing products. FLAC must compete with other insurers to attract and retain
qualified agents to market FLAC's products.

Governmental Regulation

FLAC is subject to regulation and supervision by the KID. The insurance laws of
Kansas give KID broad regulatory authority, including powers to: (i) grant and
revoke licenses to transact business; (ii) regulate and supervise trade
practices and market conduct; (iii) establish guaranty associations; (iv)
license agents; (v) approve policy forms; (vi) approve premium rates for some
lines of business; (vii) establish reserve requirements; (viii) prescribe the
form and content of required financial statements and reports; (ix) determine
the reasonableness and adequacy of statutory capital and surplus; and (x)
regulate the type and amount of permitted investments. Without limiting the
foregoing, the effect of the regulatory powers of the KID over FLAC may restrict
the ability of FLAC to dividend or otherwise transfer funds from FLAC to the
Company even if FLAC's operations are profitable and creating positive cash
flow, restrict the ability of FLAC to raise capital other than by contributions
from the Company, and require that the Company contribute additional capital to
FLAC.

Kansas has enacted legislation which regulates insurance holding company
systems, including acquisitions, extraordinary dividends, the terms of affiliate
transactions, and other related matters. Currently, the Company and FLAC have
registered as a holding company system pursuant to the laws of the state of
Kansas.

Federal Income Taxation

FLAC is taxed under the life insurance company provisions of the Internal
Revenue Code of 1986, as amended (the "Code"). Under the Code, a life insurance
company's taxable income incorporates all income, including life and health
premiums, investment income, and certain decreases in reserves. The Code
currently establishes a maximum corporate tax rate of 35%. The Code currently
requires capitalization and amortization over a five year period of certain
policy acquisition costs incurred in connection with the sale of certain
insurance products. These provisions apply to life and annuity business. Certain
proposals to make additional changes in the federal income tax laws, including
increasing marginal tax rates, and regulations affecting insurance companies or
insurance products, continue to be considered at various times in the United
States Congress and by the Internal Revenue Service. The Company currently
cannot predict whether any additional changes will be adopted in the foreseeable
future or, if adopted, whether such measures will have a material effect on its
operations.

FLAC and FLBI file a consolidated income tax return with the Company. In certain
consolidated return years, the separate tax liability of FLAC, FLBI or the
Company may be reduced through the utilization of net operating losses of the
other companies comprising the consolidated group. In addition, the taxes
payable by the consolidated group as a whole may be reduced by tax credits
generated or earned by one company of the consolidated group, which are in
effect used to reduce the separate tax liability of the other companies. The tax
savings attributable to the use of such tax attributes will inure generally to
the benefit of the company of the consolidated group that earned or generated
the tax attribute in question. Members of the consolidated group will reimburse
one another for the value of the consolidated tax attributes utilized in each
consolidated return year.

Financial Information Relating to Industry Segments

The operations of the Company and its subsidiaries have been classified into two
operating segments as follows: life and annuity insurance operations (conducted
by FLAC and by the Company pursuant to the Services Agreement) and corporate
operations. The brokerage operations of FLBI are included in corporate
operations as a result of their relative insignificance to date. All sales of
life insurance by FLAC are to unaffiliated customers. Financial information
related to these two segments of the Company's business is presented below.


                                        7

<PAGE>

<TABLE>
<CAPTION>
                                               2005          2004          2003
                                           -----------   -----------   -----------
<S>                                        <C>           <C>           <C>
Revenues:
   Life and annuity insurance operations   $ 4,628,936   $ 4,293,633   $ 3,988,400
   Corporate operations                        231,566       403,843       325,569
                                           -----------   -----------   -----------
      Total                                $ 4,860,502   $ 4,697,476   $ 4,313,969
                                           ===========   ===========   ===========

Income (loss) before income taxes:
   Life and annuity insurance operations   $   271,992   $   464,114   $   368,682
   Corporate operations                       (972,621)     (761,430)   (1,095,168)
                                           -----------   -----------   -----------
      Total                                $  (700,629)  $  (297,316)  $  (726,486)
                                           ===========   ===========   ===========

Depreciation and amortization expense:
   Life and annuity insurance operations   $   630,737   $   769,611   $   629,068
   Corporate operations                        154,301       132,902       124,093
                                           -----------   -----------   -----------
      Total                                $   785,038   $   902,513   $   753,161
                                           ===========   ===========   ===========

Assets:
   Life and annuity insurance operations   $23,337,149   $18,305,111   $15,053,265
   Corporate operations                      3,340,513     4,649,885     5,625,835
                                           -----------   -----------   -----------
      Total                                $26,677,662   $22,954,996   $20,679,100
                                           ===========   ===========   ===========
</TABLE>

Employees

As of December 31, 2005, the Company had 14 full time and 2 part time employees.

Item 2. Description of Property

The Company and FLAC own approximately six and one-half acres of land located in
Topeka, Kansas. A 20,000 square foot office building has been constructed on
approximately one-half of this land. The remaining land, including improvement
costs, is classified as real estate held for investment. The Company does not
intend to make any improvements, develop or renovate the property or building.
The Company occupies approximately 7,500 square feet of the building.
Approximately 10,000 square feet is leased to the United States Department of
Agriculture ("USDA") under a lease that commenced on July 1, 2001 and will end
on June 30, 2006. The lease will automatically renew if not terminated on or
after June 15, 2006 for another five years. The remaining 2,500 square feet is
leased to the United States Department of Transportation ("USDOT") under a lease
that commenced on September 1, 2005 and will end on August 31, 2010. The lease
will automatically renew if not terminated on or after August 15, 2010 for
another five years.

The average effective annual rental of the total leased space during 2005,
assuming no vacancy, was $18.86 per square foot or $235,664 per year. The
occupancy rate based on the total square feet available for lease in 2005 was
92%. Management believes that insurance coverage on the building is adequate.
The building is depreciated over 39 years using the straight-line method for
book and tax purposes. The annual taxes on the building are $70,559 or an
assessed rate of 25%. The annual taxes on the land are $7,525 or an assessed
rate of 12%.

The Company has granted security interests in its commercial real estate and
office building to secure a loan from Vision Bank of Topeka, Kansas in the
amount of approximately $1,730,000 on a first priority basis and a loan from
Brooke Credit Corp. in the amount of approximately $530,000 on a second priority
basis.

The Boards of Directors of the Company and FLAC and the KID have authorized the
parent company to sell the land and office building described above to FLAC.
Management anticipates that this transaction will be completed on or before


                                        8

<PAGE>

May 27, 2006. As a result, the two loans described above will be paid and
approximately $500,000 in net proceeds will be received by the parent company.
See Item 6 - Management's Discussion and Analysis of Financial Condition and
Results of Operation - Liquidity and Capital Resources.

Item 3. Legal Proceedings

On November 12, 2003, the Company filed a petition in the District Court of
Shawnee County, Kansas asserting claims against Rickie D. Meyer ("Meyer"), the
Company's former President, arising, in part, out of Meyer's employment with the
Company. Among other things, the Company sought to recover expense
reimbursements previously paid to Meyer and Company funds allegedly
misappropriated by Meyer. On August 8, 2003, the Company settled a claim that it
had breached various marketing agreements with AF&L, a long-term care insurance
company, and certain of its affiliates, through the payment to AF&L of $150,000
plus $15,000 in attorney fees. On December 12, 2003, Meyer filed an Answer and
Counterclaim against the Company asserting claims for defamation and breach of
employment agreement. On August 1, 2005, the District Court of Shawnee County,
Kansas entered an order, by agreement, submitting the claims to binding
arbitration. Following the conclusion of the arbitration, the parties entered
into a settlement agreement in November of 2005, pursuant to which the Company
agreed to pay Meyer $38,500 and Meyer and the Company agreed to settle all
claims. The Company paid the amount to Meyer in February of 2006.

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

No matter was submitted during the fourth quarter of the fiscal year covered by
this Form 10-KSB to a vote of the Company's security holders, through the
solicitation of proxies or otherwise.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

(a.) Market Information

The Company's common stock became tradeable on October 11, 1999. The common
stock is not listed on any stock exchange. Trading of the Company's common stock
in the over-the-counter market is limited and sporadic and an established public
market does not exist.

(b.) Holders

As of March 16, 2006, there are approximately 4,947 shareholders of record of
the Company's outstanding common stock.

(c.) Dividends

The Company has not paid any cash dividends since inception (July 10, 1996).
Management anticipates that for the foreseeable future any and all earnings will
be retained to fund the growth of FLAC's business and for other working capital
purposes and that as a result no dividends will be paid on the Company's stock.
As noted above, the regulatory requirements of the KID may practically restrict
the ability of the Company to transfer any operating profits produced by FLAC's
insurance operations to the Company for use in paying dividends on the Company's
stock.


                                        9

<PAGE>

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The Company makes forward-looking statements from time to time and desires to
take advantage of the "safe harbor" that is afforded such statements under the
Private Securities Litigation Reform Act of 1995 when they are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking
statements.

The statements contained in this report, which are not historical facts, are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those set forth in the forward-looking
statements. Any projections of financial performances or statements concerning
expectations as to future developments should not be construed in any manner as
a guarantee that such results or developments will, in fact, occur. There can be
no assurance that any forward-looking statement will be realized or that actual
results will not be significantly different from that set forth in such
forward-looking statement. In addition to the risks and uncertainties of
ordinary business operations, the forward-looking statements of the Company
referred to above are also subject to the following risks and uncertainties,
among others: (i) the strength of the United States economy in general and the
strength of the local economies in which the Company does business; (ii)
inflation, interest rates, market and monetary fluctuations and volatility;
(iii) the timely development of and acceptance of new products and services and
perceived overall value of these products and services by existing and potential
customers; (iv) the persistency of existing and future insurance policies sold
by the Company; (v) the effect of changes in laws and regulations with which the
Company must comply; and (vi) the cost and effects of litigation and of
unexpected or adverse outcomes in litigation.

The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto, beginning on page F-1 in this report.

Critical Accounting Policies and Estimates

The accounting policies below have been identified as critical to the
understanding of the results of operations and financial position. The
application of these critical accounting policies in preparing the financial
statements requires management to use significant judgments and estimates
concerning future results or other developments, including the likelihood,
timing or amount of one or more future transactions. Actual results may differ
from these estimates under different assumptions or conditions. On an ongoing
basis, estimates, assumptions and judgments are evaluated based on historical
experience and various other information believed to be reasonable under the
circumstances. For a detailed discussion of other significant accounting
policies, see Note 2 - Significant Accounting Policies in the Notes to the
Consolidated Financial Statements.

Investments

The Company's principal investments are held by FLAC in fixed maturity
securities. Investments are exposed to three primary sources of investment risk:
credit, interest rate and liquidity. The fixed maturity securities, which are
all classified as available for sale, are carried at their fair value in the
Company's balance sheet. The investment portfolio is monitored regularly to
ensure that investments which may be other than temporarily impaired are
identified in a timely fashion and properly valued, and that impairments are
charged against earnings as realized investment losses. The valuation of the
investment portfolio involves a variety of assumptions and estimates, especially
for investments that are not actively traded. Fair values are obtained from
broker statements.

Deferred Policy Acquisition Costs

Deferred policy acquisition costs, principally agent commissions and other
selling, selection and issue costs, which vary with and are directly related to
the production of new business, are capitalized as incurred. These deferred
costs are then amortized in proportion to future premium revenues or the
expected future profits of the business, depending upon the type of product.
Profit expectations are based upon assumptions of future interest spreads,
mortality margins, expense margins and policy and premium persistency
experience. These assumptions involve judgment and are compared to actual
experience on an ongoing basis.

Future Policy Benefits

The Company establishes liabilities for amounts payable under insurance
policies. Generally, benefits are payable over an extended period of time and
the reserves established for future policy benefits are dependent on the
assumptions used in the pricing of the products. Principal assumptions used in
pricing policies and in the establishment of reserves for


                                       10
<PAGE>

future policy benefits are mortality, morbidity, expenses, persistency,
investment returns and inflation. Differences between actual experience and
assumptions used in the pricing of these policies and in the establishment of
liabilities may result in variability of net income in amounts which may be
material.

Future Annuity Benefits

Future annuity benefits relate to deferred annuity contracts. The account
balances for deferred annuity contracts are equal to the cumulative deposits
less any applicable contract charges plus interest credited. The profitability
of these products is also dependent on principal assumptions similar to
traditional insurance products, and differences between actual experience and
pricing assumptions may result in variability of net income in amounts which may
be material.

Premiums

Premiums for traditional life insurance products are reported as revenue when
due. Traditional insurance products include whole life and term life. Deposits
relate to deferred annuity products. The cash flows from deposits are credited
to policyholder account balances. Deposits are not recorded as revenue.

Income Taxes

Deferred income taxes are recorded on the differences between the tax bases of
assets and liabilities and the amounts at which they are reported in the
consolidated financial statements. Recorded amounts are adjusted to reflect
changes in income tax rates and other tax law provisions as they become enacted.

Reinsurance

Reinsurance is one of the tools that the Company uses to accomplish its business
objectives. A variety of reinsurance vehicles are currently in use. Reinsurance
supports a multitude of corporate objectives including managing statutory
capital, reducing volatility and reducing surplus strain. At the customer level
it increases the Company's capacity, provides access to additional underwriting
expertise, and generally makes it possible for the Company to offer products at
competitive levels that the Company could not otherwise bring to market without
reinsurance support.

Financial Condition

Significant changes in the consolidated balance sheets from December 31, 2004 to
December 31, 2005 are highlighted below.

Total assets increased from $22,954,996 at December 31, 2004 to $26,677,662 at
December 31, 2005. The increase in total assets is primarily attributable to the
investment of premiums received during the year. Given the long-term nature of
the policy and contract liabilities associated with these premiums, management
is able to invest these premiums for a period of time until a payout of policy
benefits is required.

The Company's available-for-sale fixed maturity securities had a fair value of
$13,854,375 and $13,479,388 at December 31, 2005 and December 31, 2004,
respectively. This investment portfolio is reported at market value with
unrealized gains and losses, net of applicable deferred taxes, reflected as a
separate component of accumulated other comprehensive income.

Credit risk is limited by emphasizing investment grade securities and by
diversifying the investment portfolio among various investment instruments.
Certain cash balances exceed the maximum insurance protection of $100,000
provided by the Federal Deposit Insurance Corporation. However, cash balances
exceeding this maximum are protected through additional insurance. As a result,
management believes that significant concentrations of credit risk do not exist.

Available for sale equity securities increased from $236,342 at December 31,
2004 to $456,760 at December 31, 2005. The increase is attributable to the
purchases of equity securities of $247,750 during 2005. This investment
portfolio is reported at market value with unrealized gains and losses, net of
applicable deferred taxes, reflected as a separate component of accumulated
other comprehensive income.

Mortgage loans on real estate increased from $349,542 at December 31, 2004 to
$1,566,382 at December 31, 2005. The increase is attributable to the purchase of
five additional mortgage loans on commercial properties. The Company currently
owns six mortgage loans. The Company may purchase more of these types of
investments in the future in limited quantities in an effort to enhance the
Company's investment portfolio yield.


                                       11

<PAGE>

Other investments increased from $206,306 at December 31, 2004 to $1,656,866 at
December 31, 2005. The increase is attributable to the purchase of additional
investments in lottery prize cash flows during the year ended December 31, 2005.
These other investments involve purchasing assignments of the future payment
rights from the lottery winners at a discounted price sufficient to meet the
Company's yield requirements. Payments on these other investments will be made
by state run lotteries and as such are backed by the general credit of the
respective state. The Company may purchase more of these types of investments in
the future in limited quantities in an effort to enhance the Company's
investment portfolio yield.

Cash and cash equivalents decreased to $249,109 at December 31, 2005 from
$527,028 at December 31, 2004. Refer to the statement of cash flows for sources
and uses of cash.

Reinsurance receivables increased from $0 at December 31, 2004 to $78,725 at
December 31, 2005. The increase during the year represents the balance due from
Wilton Re in conjunction with the reinsurance of the Company's Golden Eagle
Whole Life (Final Expense) product (See Note 13 to the Consolidated Financial
Statements). Of the $78,725 balance due, $38,089 is attributable to commission
allowances, $30,062 is attributable to expense allowances, and $10,574
represents a recovery for paid claims.

Deferred policy acquisition costs, net of amortization, increased 14% from
$4,516,994 at December 31, 2004 to $5,133,244 at December 31, 2005 resulting
from the capitalization of acquisition expenses related to the sales of life
insurance. These acquisition expenses include commissions on first year
business, medical exam and inspection report fees, and salaries of employees
directly involved in the marketing, underwriting and policy issuance functions.
Management of the Company reviews the recoverability of deferred acquisition
costs on a quarterly basis based on current trends as to persistency, mortality
and interest. These trends are compared to the assumptions used in the
establishment of the original asset in order to assess the need for impairment.
Based on the results of the aforementioned procedures performed by management,
no impairments have been recorded against the balance of deferred acquisition
costs.

Liabilities increased to $19,354,415 at December 31, 2005 from $13,988,309 at
December 31, 2004. A significant portion of this increase is attributable to
future policy and annuity benefits related to sales of the Company's various
life insurance products. Reserves for future policy benefits established due to
the sale of life insurance increased $1,118,501 or 27% from December 31, 2004 to
December 31, 2005. These reserves are actuarially determined based on such
factors as insured age, life expectancy, mortality and interest assumptions.
Reserves for future annuity benefits increased $3,495,116 or 51% from December
31, 2004 to December 31, 2005. In 2005, annuity contract liabilities increased
due to the introduction of three new annuity products to the marketing force and
continued considerations received on the Company's FA2000 product. According to
the design of the Company's FA2000 product, first year premium payments are
allocated 100% to life insurance and renewal payments are split 50% to life and
50% to annuity.

Reinsurance premiums payable increased from $23,120 at December 31, 2004 to
$107,334 at December 31, 2005. The increase during the year is representative of
the balance due to Wilton Re in conjunction with the reinsurance of the
Company's Golden Eagle Whole Life (Final Expense) product. Of the $89,764
balance due to Wilton Re at December 31, 2005, $77,214 represents ceded premiums
and $12,550 represents a charge back of commission allowances due from Wilton
Re.

Amounts held under reinsurance increased from $0 at December 31, 2004 to
$219,079 at December 31, 2005. The increase during the year represents the
unearned portion of commission allowances due to the Company by Wilton Re in
conjunction with the reinsurance of the Company's Golden Eagle Whole Life (Final
Expense) product. Commission allowances are paid to the Company on an annualized
basis and initially recorded by the Company as a liability. The liability is
subsequently released and applied against policy acquisition costs over the
first policy year as premiums are paid on the applicable business.

Notes payable increased $481,379 from $1,791,607 at December 31, 2004 to
$2,272,986 at December 31, 2005. The increase is attributable to the Company
acquiring 450,500 shares of its common stock from Brooke Corporation ("Brooke").
The Company negotiated a purchase price of $770,355 ($1.71 per share) to include
$200,000 cash at closing, with Brooke Credit Corporation, the finance subsidiary
of Brooke, financing the remaining $570,355 at a fixed interest rate of 8% over
a ten year period.


                                       12

<PAGE>

Deferred federal income taxes payable decreased to $527,941at December 31, 2005
from $603,489 at December 31, 2004. Deferred federal income taxes payable are
established based on timing differences between income recognized for financial
statement purposes and taxable income for the Internal Revenue Service. These
deferred taxes are based on the operations of the Company and its subsidiaries
and on unrealized gains of available-for-sale securities.

Results of Operations

Significant components of revenues include life insurance premiums (net of
reinsurance), net investment income, and net realized investment gain. The
following table provides information concerning net premium income for the years
ended December 31, 2005, 2004, and 2003:

<TABLE>
<CAPTION>
                                  2005         2004         2003
                               ----------   ----------   ----------
<S>                            <C>          <C>          <C>
Whole life insurance:
   First year                  $1,091,667   $  899,629   $1,381,964
   Renewal                      3,069,155    2,701,813    2,247,022
Term insurance:
   First year                       3,932        1,099        1,352
   Renewal                         18,305       20,296       17,724
   Single premium                  17,520       17,720        9,800
                               ----------   ----------   ----------
Gross premium income            4,200,579    3,640,557    3,657,862
Reinsurance premiums assumed       12,240       10,816        5,943
Reinsurance premiums ceded       (419,660)    (117,761)    (126,531)
                               ----------   ----------   ----------
Net premium income             $3,793,159   $3,533,612   $3,537,274
                               ==========   ==========   ==========
</TABLE>

Net premium income increased $259,547 or 7% between 2004 and 2005. Total first
year whole life premium increased $192,038 or 21% from 2004 to 2005. The
increase is attributable to an increase in the production of the Company's
Golden Eagle Whole Life (Final Expense) product. Net premium income was
essentially the same in 2004 as 2003. Total first year whole life premium
decreased $482,335 or 35% from 2003 to 2004. The negative trend in first year
whole life premium during 2004 began in 2003 as a result of the disruptive
effect that the Company's 2003 proxy contest had on its customers, shareholders
and its marketing agents used to market the Company's FA2000 product. The
downward trend continued in 2004 as a result of the Company's shift in marketing
emphasis away from its FA2000 product. The FA2000 product was designed primarily
for the Company's shareholders. Once all of the shareholders were contacted,
emphasis shifted to other products.

Management spent a significant amount of time during 2004 developing new
products in an effort to enhance production going forward. Management released
several new annuity, term and whole life products during 2005. The Company's
goal in introducing these new products is to diversify the Company's product mix
and to manage its first year production to both the needs and capacity of the
Company.

Total renewal year whole life premiums increased $367,342 or 14% from 2004 to
2005 and $454,791 or 20% from 2003 to 2004. Renewal premiums reflect the premium
collected in the current year for those policies that have surpassed their first
anniversary. Renewal premiums will continue to increase unless premiums lost
from surrenders, lapses, settlement options or application of the non-forfeiture
options, exceed prior year's first year premium.

Reinsurance premiums ceded increased $301,899 from 2004 to 2005. The increase is
attributable to $306,070 in premiums ceded to Wilton Re in conjunction with the
reinsurance of the Company's Golden Eagle Whole Life (Final Expense) product.
Reinsurance premiums ceded decreased only slightly by $8,770 between 2003 and
2004.

Net investment income increased $349,817 or 68% from 2004 to 2005 and decreased
$40,932 or 7% from 2003 to 2004. During the first quarter of 2004, the Company
sold a significant portion of its bond portfolio in order to realize market


                                       13

<PAGE>

gains and reinvest the resulting proceeds using a new investment strategy. The
new strategy is focused primarily on matching maturities to the anticipated cash
needs of the Company, but also attempts to match the investment mix to others
within the Company's industry peer group. The proceeds from the sale were used
to purchase short-term securities with maturities ranging from 30 to 120 days.
As these short term securities matured, the proceeds were reinvested in
conjunction with the new investment strategy.

Net realized investment gain (loss) decreased $465,623 from 2004 to 2005, and
increased $458,967 from 2003 to 2004. The aforementioned variances are
attributable to the sale of a significant portion of the Company's bond
portfolio during the three months ended March 31, 2004. Gains totaling $464,363
were realized upon the sale of these bonds.

Benefits and expenses totaled $5,561,131, $4,994,792 and $5,040,455 for the
years ended December 31, 2005, 2004 and 2003, respectively. Included in total
benefits and expenses were policy reserve increases of $1,118,501, $1,020,812,
and $819,632 for the years ended December 31, 2005, 2004 and 2003, respectively.
Life insurance reserves are actuarially determined based on such factors as
insured age, life expectancy, mortality and interest assumptions. As more life
insurance is written and existing policies reach additional durations, policy
reserves will continue to increase.

Policyholder surrender values increased $101,076 from 2004 to 2005 and $8,376
from 2003 to 2004. The increase is attributable to the increase in the number of
policies inforce and the continued maturation of those policies.

Interest credited on annuities and premium deposits totaled $405,778, $344,918,
and $304,283 for the years ended December 31, 2005, 2004 and 2003, respectively.
The increases during 2005 and 2004 of $60,860 and $40,635, respectively, are
primarily a result of the increase in annuity fund balances. Both interest
credited on annuities and premium deposits have increased as a result of the
increase in the number of policies inforce (9,856, 8,318, and 6,582 in 2005,
2004 and 2003, respectively). The average interest credit rate on annuities and
premium deposits has decreased from 7.4% and 5.7% during 2003 and 2004,
respectively, to 4.7% during 2005. The decrease is attributable to management's
attempt to more effectively manage the interest spread between the rate the
Company earns on its investment portfolio and the rate being credited to
policyholder accounts combined with the introduction of several new annuity
products during 2005 which are deemed to be shorter in duration and thus credit
interest at a lesser rate than other annuities which have historically been
offered by the Company.

Death claims increased $218,009 from 2004 to 2005 and $37,352 from 2003 to 2004.
The increase is attributable to the increase in the number of policies inforce
and the continued maturation of those policies. Mortality experienced by the
Company to date is within management's expectations.

Commission expense totaled $1,200,741, $1,059,798, and $1,235,074 for the years
ended December 31, 2005, 2004 and 2003, respectively. Commission expense is
based on a percentage of premium and is determined in the product design.
Additionally, higher percentage commissions are paid for first year business
than renewal year. The increase in commission expense during 2005 is directly
related to the increase in net premium income during 2005. The increase during
2005 was partially offset by commission allowances of $335,931 from Wilton Re
being netted against the balance of commission expense. Commission allowances
received on reinsured business essentially serve as a reimbursement to the
Company for acquisition costs incurred to write business. The decrease in
commission expense in 2004 is directly related to the decrease in first year
premium during the year.

Salaries, wages and employee benefits increased from $1,119,185 and $1,150,230
in 2004 and 2003, respectively, to $1,234,824 in 2005. The increase during 2005
is primarily attributable to an increase in employee headcount combined with
increased employee benefit expenses.

Other operating costs and expenses totaled $1,336,307, $1,359,969, and
$1,845,155 for the years ended December 31, 2005, 2004 and 2003, respectively.
The balance of other operating costs and expenses during 2005 is comprised of
gross costs totaling $1,492,972, offset by expense allowances received from
Wilton Re totaling $156,665. Expense allowances received on reinsured business
essentially serve as a reimbursement to the Company for acquisition costs
incurred to write business. Significant components of the $133,003 increase in
gross other operating costs and expenses from 2004 to 2005 include the
following. EDP (Electronic Data Processing) costs increased $63,268 in
conjunction with conversion process consulting related to the Company's two life
insurance administration systems. Agency expenses increased $27,710 in
conjunction with an agency incentive contest. Miscellaneous losses increased
$73,965 resulting from a $35,465 loss incurred on a transaction with Brooke (see
Item 12 Certain Relationships and Related Transactions)


                                       14

<PAGE>

and a $38,500 loss on the settlement of pending litigation (see Item 3 Legal
Proceedings). Other increases realized during 2005 included building operations
($43,732), interest ($33,370) and depreciation ($20,961). The aforementioned
increases were offset by reductions in actuarial and legal fees of $73,858 and
$60,965, respectively. These decreases are primarily attributable to the
nonrecurrence of the professional fees and expenses incurred in 2004 in support
of the activities of a special committee of the Board of Directors of the
Company, described as follows.

On July 12, 2004, Brooke filed an amendment to a Schedule 13D previously filed
by such party, stating that it may explore the acquisition of additional shares
of the Company's common stock through private negotiations or a tender offer for
the purpose, among other things, of possibly obtaining control of the Company
and replacing all or substantially all of the members of the Company's board of
directors and management. The Board of Directors of the Company, acting on
behalf of all shareholders in accordance with the legal obligations arising as a
result of the public statements made by Brooke, charged a special committee of
independent directors with evaluating these actions and preparing for an
appropriate response in the event that Brooke were to take actions in
furtherance of its public statements. The actions of the special committee
included the retention of independent outside legal counsel, financial advisors,
and actuaries. The costs of these extraordinary activities comprise the offset
amounts described above. On March 2, 2005, the Company repurchased 450,500
shares of the Company's common stock from Brooke. See Item 12 Certain
Relationships and Related Transactions.

The decrease in other operating costs and expenses of $485,186 during 2004
resulted primarily from the nonrecurrence of the professional fees and expenses
incurred by the Company during the 2003 period in connection with its annual
meeting of stockholders for that year and a related proxy contest and resulting
litigation. These professional fees and expenses totaled $510,318 in 2003, as
compared with professional fees and expenses of $98,726 incurred in support of
the 2004 annual meeting of stockholders. The decrease in other operating costs
and expenses in the 2004 period also is attributable to payment in the 2003
period of $165,000 in settlement of a claim by AF&L, Inc. that the Company had
breached various marketing agreements. These decreases were partially offset by
payment of $135,609 of professional service fees incurred in 2004 in support of
the activities of a special committee of the Board of Directors as referred to
previously.

As a result of the items noted above net loss increased $467,693 to $700,629
from $232,936 for the years ended December 31, 2005 and 2004, respectively, and
decreased $253,064 to $232,936 from $486,000 for the years ended December 31,
2004 and 2003, respectively.

Liquidity and Capital Resources

During the years ended December 31, 2005, 2004, and 2003, the Company maintained
liquid assets sufficient to meet operating demands, while continuing to utilize
excess liquidity to purchase various investments. Net cash provided by (used in)
operating activities during the years ended December 31, 2005, 2004 and 2003
totaled $768,938, $404,894 and ($179,098), respectively.

As of December 31, 2005, the Company and its subsidiaries had consolidated cash
reserves and liquid investments of approximately $14,543,444, as compared with
$14,200,958 at the end of 2004 and $12,890,488 at the end of 2003. Of these
amounts, cash reserves and liquid investments at FLAC as of these dates were
approximately $14,112,878, $12,812,107, and $10,541,139, respectively. FLAC
generally receives adequate cash flow from premium collections and investment
income to meet the obligations of its insurance operations. Insurance policy
liabilities are primarily long-term and generally are paid from future cash
flows. Cash collected from deposits on annuity contracts and policyholder
premium deposits are recorded as cash flows from financing activities. Due to
insurance regulatory restrictions, as noted above, cash generated by FLAC cannot
necessarily be used to fund the cash needs of the parent company on a
stand-alone basis.

As of December 31, 2005, cash reserves and liquid investments at the parent
company level were approximately $419,540 as compared with $1,388,851 at the end
of 2004 and $2,349,349 at the end of 2003. Cash reserves at FLBI were $11,026 at
the end of 2005. Based on the decreasing level of cash reserves and liquid
investments at the parent company level over the past few years, in 2005,
management began to pursue all reasonable alternatives for increasing cash
reserves at the parent company level. As an initial step in this process, the
Board of Directors of each of the parent company and FLAC have approved a
transaction pursuant to which FLAC has agreed to purchase the Company's home
office building and the real property on which it is located from the parent
company at its value of $2,800,000, which


                                       15

<PAGE>

was determined based on an independent appraisal. On March 28, 2006, the KID
approved this transaction pursuant to a Form D (Prior Notice of a Transaction)
filed by the Company, and management anticipates that it will be completed on or
before May 27, 2006. Proceeds from the sale will be used by the parent company
to pay off the two creditors that currently hold mortgages on the building, thus
resulting in interest savings of approximately $890,000 over the life of the
loans. In addition, the transaction will provide the parent company with
approximately $500,000 in cash. This cash will be used to fund operations at the
parent company.

Based on currently forecasted cash flow levels, management anticipates that the
$500,000 in cash provided to the parent company as a result of the
aforementioned transaction plus the parent company's existing cash reserves of
approximately $420,000 will fund operations at the parent company level into mid
2007. Therefore, in the interim, management will continue to explore all
reasonable opportunities to provide additional capital to the parent company
through the sale of new equity securities or debt securities, or through
borrowed funds. Successful efforts in this arena will not only help to remedy
the parent company's current cash situation, but also allow management to fully
implement its business development plan of expanding the Company's product lines
and marketing efforts through the infusion of additional capital into FLAC's
insurance operations and FLBI's brokerage operations. If these efforts are not
successful, however, then the Company will have no choice but to cease
operations as a public company and liquidate its assets, which primarily are the
insurance operations of its subsidiary FLAC. There is no assurance of what if
any value could be realized by the parent company in this event.

Item 7. Financial Statements

The consolidated financial statements and related notes are included in this
report beginning on page F-1.

Item 8. Changes in and Disagreements with Accountants on Accounting and
     Financial Disclosure

On April 15, 2004, the Company discharged Kerber, Eck & Braeckel LLP ("KE&B") as
its independent accountants. The Company's Audit Committee participated in and
approved the decision to change independent accountants.

The reports of KE&B on the financial statements for the two fiscal years prior
to the change contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principle.

In connection with its audits for the two fiscal years prior to the change and
through April 15, 2004, there were no disagreements with KE&B on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
KE&B would have caused them to make reference thereto in their report on the
financial statements for such years.

During the two fiscal years prior to the change and through April 15, 2004,
there were no reportable events (as defined in Regulation S-B Item
304(a)(1)(iv)(B)).

The Company requested that KE&B furnish it with a letter addressed to the SEC
stating whether or not it agrees with the above statements. A copy of such
letter, dated April 19, 2004, was filed as Exhibit 99.1 to the Company's Form
8-K filed April 21, 2004.

The Company engaged BKD, LLP ("BKD") as its new independent accountants as of
April 15, 2004. During the two most recent fiscal years and through April 15,
2004, the Company did not consult with BKD regarding either (i) the application
of accounting principles to a specific completed or contemplated transaction, or
the type of audit opinion that might be rendered on the Company's financial
statements and either written or oral advice was provided that BKD concluded was
an important factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue; or (ii) any matter that was
either the subject of a disagreement, as that term is defined in Item
304(a)(1)(iv)(A) of Regulation S-B and the related instructions to Item 304 of
Regulation S-B, or a reportable event, as that term is defined in Item
304(a)(1)(iv)(B) of Regulation S-B.


                                       16

<PAGE>

Item 8a. Controls and Procedures

The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. This information is accumulated and
communicated to Company management to allow timely decisions regarding
disclosure. The Company's Chief Executive Officer and Chief Financial Officer
conducted an evaluation of the Company's disclosure controls and procedures as
of the end of the period covered by this report. Based upon their evaluation of
those controls and procedures, the Chief Executive Officer and Chief Financial
Officer of the Company concluded that the Company's disclosure controls and
procedures are effective in alerting them on a timely basis to material
information required to be disclosed in the Company's periodic filings.

The Company made no significant changes in its internal controls over financial
reporting or in other factors that could significantly affect these controls
subsequent to the date of the evaluation of those controls by the Chief
Executive Officer and Chief Financial Officer.

PART III

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

The current Executive Officers and Directors of the Company are as follows:

<TABLE>
<CAPTION>
Name                   Age   Position
----                   ---   --------

<S>                    <C>   <C>
Harland E. Priddle      75   Chairman of the Board, Secretary and Director
John F. Van Engelen     53   President, CEO and Director
Patrick A. Tilghman     32   Treasurer and CFO
Paul E. Burke Jr.       72   Director
Edward C. Carter        63   Director
Thomas M. Fogt          60   Director
Kenneth L. Frahm        59   Director
Stephen J. Irsik Jr.    59   Director
John G. Montgomery      66   Director
Gary E. Yager           51   Director
</TABLE>

The Directors serve until their successors are elected and qualified. Directors
are elected annually by the stockholders. The Executive Officers serve at the
discretion of the Board of Directors. The President, Secretary and Treasurer are
elected at the annual meeting of the Board, while the other officers are elected
by the Board from time to time as the Board deems advisable. The following is a
brief description of the previous business background of the Executive Officers
and Directors:

Harland E. Priddle: Mr. Priddle has been a Director of the Company since its
inception and has been the Chairman of the Board since November 15, 2002. Mr.
Priddle is President of Priddle & Associates, a business consulting firm
specializing in business and economic development consulting. Mr. Priddle is the
former Kansas Secretary of Agriculture (1982-1986) and served as the first
Kansas Secretary of Commerce (1987-1991). As the first Secretary of Commerce, he
was directly involved in the creation of such programs as Kansas, Inc., Kansas
Technology Enterprise Corporation, Kansas Development Finance Authority and the
Kansas Venture Capital Corp. He was candidate for Lt. Governor of Kansas in 1986
and 1990. He was the Deputy Director of the White House Communications Agency
for the President for a period of four years (1970-1974) where he provided
support and accompanied the President on approximately 200 Presidential trips.
Mr. Priddle was the Vice President for Marketing and Customer Services for the
Hutchinson National Bank from 1978 to 1981. He also has served as Assistant
Manager of the Kansas State Fair (1974-1978) and Executive Director of the
Kansas Wildscape Foundation (1999-2002), a not for profit foundation dedicated
to creating outdoor opportunities in Kansas. He retired from the United States
Air Force in 1974, after 22 years, with the


                                       17
<PAGE>

rank of Colonel. While in the Air Force, he received 17 military decorations
including the Bronze Star and two Legions of Merit. He is a veteran of both
Korea and Vietnam Campaigns. He received a BS in Agriculture from Kansas State
University in 1952.

John F. Van Engelen: Mr. Van Engelen was named President and CEO of the Company
on February 16, 2004. Mr. Van Engelen previously was the President of Western
United Life. Mr. Van Engelen joined Western United Life in 1984 as its
underwriting manager, and shortly thereafter he was appointed Vice
President--Underwriting. From 1987 to 1994, he was Vice President--Sales and a
Regional Sales Manager. During 1994, he was appointed President of Western
United Life. Prior to joining Western United Life, Mr. Van Engelen had worked in
the insurance industry and in corporate and public accounting. He holds the
following certifications: CPA, CFP, CLU, ChFC, and FLMI. He is also a member of
the American Institute of Certified Public Accountants, Society of Financial
Service Professionals, and a board member of the New Mexico Life and Health
Guaranty Fund. Mr. Van Engelen holds a Bachelor of Business Administration in
Accounting from Boise State University.

Patrick A. Tilghman: Mr. Tilghman joined the Company in July, 2001 as
Controller. He was appointed as Treasurer and Chief Financial Officer effective
July 6, 2004. He is responsible for the oversight of the accounting function
with specific emphasis being placed in the areas of financial reporting,
internal financial analysis, forecasting and cash management. Prior to joining
the Company, Mr. Tilghman worked for PricewaterhouseCoopers LLP in their audit
division servicing clients primarily in the insurance, health care and
entertainment industries. Mr. Tilghman received his Bachelor of Business
Administration and Accounting with Honors from the University of Kansas. He
holds the designation of CPA and is a member of the American Institute of
Certified Public Accountants. Mr. Tilghman resigned as Treasurer and Chief
Financial Officer effective March 31, 2006.

Paul E. Burke, Jr.: Mr. Burke, who has been a Director of the Company since its
inception, is the President of Issues Management Group, Inc., a public relations
and governmental affairs consulting company. Mr. Burke served as a member of the
Kansas State Senate from 1975 to January 1997 and served as the President of the
Senate from 1989 until his retirement in 1997. During his tenure in the Kansas
Senate, Mr. Burke served as Chairman of the Organization, Calendar and Rules,
Legislative Coordinating Council and Interstate Cooperation Committees. Mr.
Burke was a majority leader of the Senate from 1985 to 1988. Mr. Burke has
served in numerous national, state and local leadership positions including past
positions as a member of the President's Advisory Commission on
Intergovernmental Relations. He is also the former owner of WEBBCO, Inc., an
industrial engineering and equipment company. Mr. Burke received his Bachelor of
Science degree in business from the University of Kansas in 1956.

Edward C. Carter: Mr. Carter, who has been a Director of the Company since its
inception, is an entrepreneur and real estate developer. Mr. Carter is a retired
senior executive (1963-1992) with the Kansas Southwestern Bell Telephone
Company. He served in numerous senior executive positions including Division
Manager Regulatory Relations, Regional Vice President Southwestern Bell Telecom,
a start up company serving a four state area, and Kansas Director of Marketing
and District Manager Residence Service Centers. Mr. Carter served as City
Commissioner and Mayor of Lawrence, Kansas from 1977 to 1981. He was a director
and President of the Lawrence, Kansas Rotary Club, past Executive Board Member
of the Kansas State Chamber of Commerce, past Chairman of the Douglas County
United Fund and Director and President of Junior Achievement. He is a
Co-Recipient of the Outstanding Kansan Award for Civic Service and received the
Lifetime Meritorious Achievement Award from Pittsburgh State University in 2001.
Mr. Carter was a member and All Conference guard on the Pittsburgh State
University National Championship Football Team. He received his B.A. in Business
Administration from Pittsburgh State University in 1963.

Thomas M. Fogt: Mr. Fogt has been a director of the Company since March 31,
2003. Mr. Fogt has over twenty-five years of experience in insurance, financial
management, accounting, corporate development and business planning. He has a
master's degree from Xavier University in business and is a member of the
American Institute of Certified Public Accountants. Mr. Fogt formerly served as
Executive Vice President for AmerUs Annuity Group Co., a subsidiary of AmerUs
Group, from 1994 to 2005, with responsibilities for finance and accounting, as
well as mergers and acquisitions. Prior to joining AmerUs, Mr. Fogt was a
partner with the accounting firm of Deloitte & Touche.

Kenneth L. Frahm: Mr. Frahm, who has been a Director of the Company since its
inception, has been a self-employed farmer since 1975. He currently owns 1,200
acres of irrigated corn and dryland wheat production land and is a member of a
family partnership, which produces over 500,000 bushels of corn and wheat
annually on 6,500 acres of western Kansas farm land. Mr. Frahm's operating
entities include Allied Family Farm and Grain Management, Inc. He is past


                                       18

<PAGE>

President of the Kansas Development Finance Authority. He is past Chairman of
21st Century Grain Processing Cooperative, and a former member of the Board of
Directors of Bank IV Community Bank in Colby. In addition, Mr. Frahm is a member
of the Kansas Farm Service Agency State Committee appointed by US Agriculture
Secretary Ann Veneman. In 2006, he was appointed a member and Chairman of the
Kansas Energy Council by Governor Sebelius. He is a member of the Agricultural
Use Value Committee of the Kansas Department of Revenue, an Executive Committee
member of the Fort Hays State University Endowment Association, a past member of
the Board of Directors of the Kansas Area United Methodist Foundation and
Chairman of its Investment Committee, Past President and Paul Harris Fellow of
Rotary, a member of the Kansas Farm Bureau, Kansas Livestock Association, Kansas
Corn Growers Association, Kansas Association of Wheat Growers and serves on the
Boards of Directors of the Ogallala Aquifer Institute and the Kansas Water
Congress. Mr. Frahm is married to Sheila Frahm, a former Kansas United States
Senator and has three daughters. Mr. Frahm received his B.A. in Economics in
1968 from Fort Hays Kansas State College and his M.B.A. in Finance in 1969 from
the University of Texas at Austin.

Stephen J. Irsik Jr.: Mr. Irsik, who has been a Director of the Company since
its inception, is one of the owners of a multi faceted agri-business centered in
western Kansas. The business deals with identity preserved grain production,
angus beef and the dairy industry. Mr. Irsik is one of the owners of Irsik &
Doll Company, a grain storage, merchandising and full feeding cattle operation
with facilities across the State of Kansas. Mr. Irsik is serving his 16th year
on the Gray County Commission. He currently serves on the 21 Century Alliance
Board, 21Century Grain Processing board and Home National Bank Board of Garden
City, Kansas. Mr. Irsik has served as a past Board member of the Southwest
Kansas Irrigation Association, Upper Ark Basin Advisory committee and Ground
Water Management District #3. He is a graduate of Kansas State University and a
veteran of the United States Air Force.

John G. Montgomery: Mr. Montgomery, who has been a Director of the Company since
its inception, is the President of Montgomery Communications, Inc. of Junction
City, Kansas. He is a newspaper publisher and TV station owner. He is also
President of the Junction City Housing and Development Corporation. From 1964 to
1973 he was the Assistant to the President at the San Francisco Newspaper
Printing Company. Mr. Montgomery is a member of the InterAmerican Press
Association, Inland Daily Press Association and the Kansas Press Association. He
was Civilian Aid to the Secretary of the Army of Kansas from 1979-1981 and has
again served in that role since 1995. He has extensive state government service
including Past Chairman of the Kansas Board of Regents, Past member of the
Washburn University Board of Regents, and 1986 Democratic nominee for Lieutenant
Governor. His considerable civic involvement, in part, includes being past
President of the Junction City Chamber of Commerce, Director and past President
of the United Way, past Board member of the Boy Scouts of America, Coronado
Council, past Director of the armed service YMCA, Trustee of the William Allen
White Foundation, Co-chair of Economic Lifelines, Board member of Kansas
Wildscape and the Kansas 4-H and a member of the Rotary Club. Mr. Montgomery has
received the 1975 Jaycees Outstanding Young Man of Kansas Award, 1975 Junction
City Jaycees Distinguished Service Award and the Department of the Army,
Patriotic Civilian Service Award. He graduated from the Philips Academy,
Andover, Massachusetts, in 1958, Yale University in 1962, receiving a Bachelor
of Arts Degree, and from Stanford University in 1964, where he received his MBA
Degree.

Gary E. Yager: Mr. Yager, who has been a Director of the Company since its
inception, became the President and CEO of Vision Bank in May of 2005. Vision
Bank is a locally owned bank in Topeka, Kansas. Prior to becoming the President
and CEO of Vision Bank, Mr. Yager had served as the Vice Chairman of Western
National Bank since September of 2002. From December 1995 to September of 2002
Mr. Yager was the Executive Vice President and Chief Executive Officer and
Senior Lender of the Columbian Bank of Topeka, Kansas. From October 1986 to
December 1995, Mr. Yager served as either the Vice President and Branch Manager
or the Vice President of Commercial Loans for the Commerce Bank and Trust of
Topeka, Kansas. From 1976 to 1986, he served in various management positions
with Bank IV of Topeka including Assistant Vice-President of Correspondent
Banking and Branch Manager. Mr. Yager is currently a member of the Topeka
Housing Authority, Topeka Chamber of Commerce, Art Council of Topeka, the
Washburn University Ichabod Club and the Washburn University Moore Bowl
Renovation Committee. Additionally, he currently serves as President of Downtown
Topeka, Inc. and as Chairman of the Business Improvement District of Topeka. He
is a former member of the Board of Directors of the Topeka Family Service and
Guidance Center and former advisor of Junior Achievement. He is a past member of
the Topeka Active 20-30 Club, where he served in numerous leadership roles
including President and Treasurer. Mr. Yager received his BA degree in Business
Administration from Washburn University of Topeka in 1976.


                                       19

<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of change in ownership with the SEC. Such persons are
required by SEC regulations to furnish the Company with copies of all forms
under Section 16(a). To the Company's knowledge, all filings were made on a
timely basis during 2005.

Audit Committee

The Board of Directors has a standing Audit Committee established in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The
Audit Committee is responsible for the selection, review and oversight of the
Company's independent accountants, the approval of all audit, review and attest
services provided by the independent accountants, the integrity of the Company's
reporting practices and the evaluation of the Company's internal controls and
accounting procedures. It also periodically reviews audit reports with the
Company's independent auditors. The Audit Committee is currently comprised of
Gary Yager, John Montgomery and Thomas Fogt. Each of the members of the Audit
Committee are "independent" as that term is defined in Rule 4200(a)(14) of the
Nasdaq Marketplace Rules. The Board of Directors has adopted a written charter
for the Audit Committee. The Board of Directors has determined that Mr. Fogt is
an "audit committee financial expert" as defined under regulations of the SEC.

Code of Ethics

The Company has adopted a code of ethics that applies to all executive officers
and directors.


                                       20

<PAGE>

Item 10. Executive Compensation

The following table sets forth amounts earned over the past three fiscal years
by all persons who served as the Chief Executive Officer of the Company at any
time during fiscal 2005 and by each person employed by the Company as of the end
of fiscal 2005 whose total salary and bonus paid during that year exceeded
$100,000.

                               Annual Compensation

<TABLE>
<CAPTION>
                                                                      Other Annual         All Other
Name and Principal Position   Year   Salary ($)   Bonus ($) (1)   Compensation ($) (2)   Compensation
---------------------------   ----   ----------   -------------   --------------------   ------------
<S>                           <C>    <C>          <C>             <C>                    <C>
John F. Van Engelen (3)       2005     141,108        31,745              3,600            5,157 (4)
President and CEO             2004     118,641        28,000              4,000            2,886 (5)
                              2003          --            --                 --               --

Richard H. Katz (6)           2005      90,705        45,232                800               --
Chief Marketing Officer       2004          --            --                 --               --
                              2003          --            --                 --               --
</TABLE>

(1)  Bonus includes amounts accrued as of and paid subsequent to the applicable
     fiscal year-end.

(2)  Other Annual Compensation consists of automobile allowances. The aggregate
     cost to the Company of such personal benefits did not exceed the lesser of
     $50,000 or 10% of the total annual salary and bonus received by the
     applicable executive officers.

(3)  Mr. Van Engelen became President and CEO of the Company on February 16,
     2004.

(4)  All Other Compensation for Mr. Van Engelen for the 2005 fiscal year
     consists of matching contributions to a SIMPLE IRA retirement plan.

(5)  All Other Compensation for Mr. Van Engelen for the 2004 fiscal year
     consists of nonqualified moving expenses paid by the Company for the
     benefit of Mr. Van Engelen in conjunction with his relocation from Spokane,
     Washington to Topeka, Kansas

(6)  Mr. Katz became Chief Marketing Officer of the Company on February 7, 2005.
     Mr. Katz is not considered an executive officer of the Company, but is
     included in the table pursuant to the applicable compensation disclosure
     requirements.

Compensation of Directors

Each non-employee director is paid $750 per regular meeting attended for the
Company and its subsidiaries, $75 per telephonic meeting and $250 per committee
meeting.

Executive Employment Agreements

Effective July 1, 2005, the Company entered into an Employment Agreement with
Mr. John F. Van Engelen to serve as President and Chief Executive Officer of the
Company and its subsidiaries. The agreement is for a term of one year. The
agreement calls for a gross annual base salary of $144,800. In addition, a
performance bonus of not less than 20% of the gross annual base salary will be
paid no later than January 31 of the next year of employment under the agreement
if Mr. Van Engelen's performance is determined to be satisfactory by the
Company's Board of Directors. In 2006, the Board of Directors of the Company
approved a bonus of $28,960 payable with respect to the 2005 fiscal year. In the
event that there is a change in control of the Company during the term of the
agreement, Mr. Van Engelen may terminate his employment with the Company within
a period of 60 days after the change in control becomes effective. In such
event, Mr. Van Engelen will receive a lump sum cash payment in the amount of
$144,800 within 30 days of his last day of employment.


                                       21

<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of March 16, 2006, regarding
ownership of Common Stock of the Company by (i) the only persons known by the
Company to own beneficially more than 5% thereof; (ii) the executive officers
and directors individually; and (iii) all officers and directors as a group.

<TABLE>
<CAPTION>
   Name and Address of                        Amount and Nature of
     Beneficial Owner        Class of Stock   Beneficial Ownership   Percent of Class
   -------------------       --------------   --------------------   ----------------
<S>                          <C>              <C>                    <C>
Paul E. Burke, Jr.
2009 Camelback Drive
Lawrence, KS 66047               Common               50,000               1.17%

Edward C. Carter
4100 Wimbledon Drive
Lawrence, KS 66047               Common               85,000               2.00%

Thomas M. Fogt
8200 W 101st Terrace
Overland Park, KS 66212          Common                  200                   *

Kenneth L. Frahm
Box 849
Colby, KS 67701                  Common               40,000                   *

Stephen J. Irsik, Jr.
05405 Six Road
Ingalls, KS 67853                Common               69,000               1.62%

Rickie D. Meyer
3513 SW Alameda Drive
Topeka, KS 66614                 Common              256,000               6.01%

John G. Montgomery
Box 129
Junction City, KS 66441          Common               45,000               1.06%

Harland E. Priddle
8214 South Haven Rd.
Burrton, KS 67020                Common               40,000                   *

Patrick A. Tilghman
3208 SW 19th Street
Topeka, KS 66604                 Common                   --                   *

John F. Van Engelen
4624 NW Kendall Drive
Topeka, KS 66618                 Common                1,000                   *

Gary E. Yager
3521 SW Lincolnshire
Topeka, KS 66614                 Common               40,000                   *

All Directors and Officers
   as a Group (10 persons)                           370,200               8.70%
</TABLE>

*    Indicates less than 1% ownership.


                                       22
<PAGE>

Item 12. Certain Relationships and Related Transactions

The mortgage note on the commercial property and office building that the
Company owns is financed by Vision Bank of Topeka, Kansas. Gary Yager, a
Director of the Company, is the President and CEO of Vision Bank. As of December
31, 2005, the remaining principal balance on the note was $1,736,671. The note
is payable in 120 monthly payments of $13,534 each with a final payment of the
unpaid principal balance and interest due on April 22, 2013. Interest will be
accrued at 6% per annum until April 22, 2008, at which time the interest rate
may change to the Wall Street Journal Prime Rate of Interest at such time,
subject to a floor of 6% per annum and a ceiling of 9.5% per annum. The note is
secured by a first priority security interest in the Company's commercial real
estate and office building. Management believes that the terms obtained from
Vision Bank at the time of financing were no less favorable to the Company than
those available from an independent lender.

On March 2, 2005, the Company entered into a Stock Repurchase Agreement with
Brooke Corporation, whereby the Company repurchased 450,500 shares of the
Company's common stock from Brooke Corporation. The privately-negotiated
transaction returned approximately 9.7% of the Company's total stock to the
corporate treasury, making it available for use for future planned
capitalization. The Company negotiated a purchase price of $770,355 ($1.71 per
share) to include $200,000 cash at closing, with Brooke Credit Corporation, the
finance subsidiary of Brooke Corporation, financing the remainder at a fixed
interest rate of 8% over a ten year period. The agreement also grants Brooke
warrants to purchase up to 150,000 shares of the Company's common stock at
prices ranging from $1.71 per share to $5.00 per share. The warrants are
exercisable in 2012 or immediately prior to any earlier change of control
involving FACC, are subject to certain covenants and conditions, and expire no
later than 2015.

Pursuant to the Stock Repurchase Agreement, Brooke Corporation agreed that
neither it nor its affiliates would take certain actions with respect to the
Company or its stock for a period of five years, including acquiring beneficial
ownership of the common stock, soliciting proxies or participating in any proxy
contest or other effort to take control of the Company or its affiliates.

The Company has granted a second priority security interest in its commercial
real property and office building to secure the loan from Brooke Credit Corp.

The Boards of Directors of the Company and FLAC and the KID have authorized the
parent company to sell its office building and related real estate to FLAC, the
proceeds of which will be used in part to repay the notes to Vision Bank and
Brooke Corporation described above. Management anticipates that this transaction
will be completed on or before May 27, 2006. See Item 6 - Management's
Discussion and Analysis of Financial Condition and Results of Operation -
Liquidity and Capital Resources.

Mr. Van Engelen entered into an employment agreement with the Company effective
July 1, 2005 to serve as President and CEO of the Company. See Item 10 Executive
Compensation above.


                                       23

<PAGE>

Item 13. Exhibits and Reports on Form 8-K

The following documents are filed as part of this Form 10-KSB:

(a)  Financial Statements are attached hereto and included herein on pages F-1
     through F-27.

(b)  Index to Exhibits

<TABLE>
<CAPTION>
Exhibit
  No.     Description
-------   -----------
<S>       <C>
3.1       Articles of Incorporation of First American Capital Corporation
          (Incorporated by reference from Exhibit 2.1 to the Registrant's
          amended Form 10-SB filed August 13, 1999)

3.2       Bylaws of First American Capital Corporation, as amended (Incorporated
          by reference from Exhibit 3.2 to the Registrant's Form 8-K filed April
          11, 2005)

4         Certificate of Designations, Preferences and Relative, Participating,
          Optional and Other Special Rights of Preferred Stock and
          Qualifications, Limitations, and Restrictions Thereof of 6%
          Non-Cumulative, Convertible, Callable Preferred Stock (Incorporated by
          reference from Exhibit 3 to the Registrant's amended Form 10-SB filed
          August 13, 1999)

10.1      Form of Advisory Board Contract (Incorporated by reference from
          Exhibit 6.2 to the Registrant's amended Form 10-SB filed August 13,
          1999)

10.2      Service Agreement amended and restated effective January 1, 2002
          between First American Capital Corporation and First Life America
          Corporation (Incorporated by reference from Exhibit 10.3 to the
          Registrant's Form 10-KSB filed March 31, 2003)

10.3      Automatic Umbrella and Bulk ADB Reinsurance Agreements effective
          September 1, 1998 between First Life America Corporation and Business
          Men's Assurance Company of America (Incorporated by reference from
          Exhibit 6.8 to the Registrant's Form 10-SB filed August 13, 1999)

10.4      Employment Agreement effective July 1, 2005 between First American
          Capital Corporation and John F. Van Engelen (Incorporated by reference
          from Exhibit 10.4 to the Registrant's Form 8-K filed August 19, 2005)

10.5      Intercompany Tax Sharing Agreement dated December 31, 2003 between
          First American Capital Corporation and First Life America Corporation
          (Incorporated by reference from Exhibit 10.6 to the Registrant's Form
          10-KSB filed March 29, 2004)

10.6      Stock Repurchase Agreement between First American Capital Corporation
          and Brooke Corporation dated March 2, 2005 (Incorporated by reference
          from Exhibit 10.7 to the Registrant's Form 10-KSB filed March 31,
          2005)

10.7      Warrant for 50,000 shares of First American Capital Corporation common
          stock for $1.71per share issued to Brooke Corporation effective March
          2, 2005 (Incorporated by reference from Exhibit 10.8 to the
          Registrant's Form 10-KSB filed March 31, 2005)

10.8      Warrant for 50,000 shares of First American Capital Corporation common
          stock for $3.35per share issued to Brooke Corporation effective March
          2, 2005 (Incorporated by reference from Exhibit 10.9 to the
          Registrant's Form 10-KSB filed March 31, 2005)

10.9      Warrant for 50,000 shares of First American Capital Corporation common
          stock for $5.00per share issued to Brooke Corporation effective March
          2, 2005 (Incorporated by reference from Exhibit 10.10 to the
          Registrant's Form 10-KSB filed March 31, 2005)
</TABLE>


                                       24

<PAGE>

Item 13. Exhibits and Reports on Form 8-K (CONTINUED)

<TABLE>
<CAPTION>
Exhibit
  No.     Description
-------   -----------
<S>       <C>
10.10     Employment Agreement effective February 7, 2005 between First American
          Capital Corporation and Richard H. Katz (Incorporated by reference
          from Exhibit 10.11 to the Registrant's Form 8-K filed April 22, 2005)

10.11     Promissory Note dated April 22, 2003, from First American Capital
          Corporation to Western Nation Bank (now Vision Bank) (*)

10.12     Promissory Note dated March 2, 2005, from First American Capital
          Corporation to Brooke Credit Corporation (*)

10.13     Automatic Reinsurance Agreement between First Life America Corporation
          and Wilton Reassurance Company effective January 1, 2005 (*)

14.1      First American Capital Corporation Code of Ethics for Executive
          Management and Board of Directors (Incorporated by reference from
          Exhibit 14.1 to the Registrant's Form 10-KSB filed March 29, 2004)

21        Subsidiaries of First American Capital Corporation (*)

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

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

32.1      Certificate of Chief Executive Officer pursuant to Section 18 U.S.C.
          Section 1350 (*)

32.2      Certificate of Chief Financial Officer pursuant to Section 18 U.S.C.
          Section 1350 (*)
</TABLE>

(*)  Filed herewith

(c)  Reports on Form 8-K

The Company did not file any reports on Form 8-K during the fourth quarter of
2005.


                                       25
<PAGE>

Item 14.  Principal Accountant Fees and Services

All audit related services were pre-approved by the Audit Committee, which
concluded that the provision of such services by BKD LLP was compatible with the
maintenance of this firm's independence in the conduct of its auditing
functions.

The following table represents fees for professional audit services rendered by
BKD LLP for the audit of the Company's annual financial statements and for the
review of the financial statements included in our quarterly reports.

<TABLE>
<CAPTION>
                     Years Ended
                    December 31,
                 ------------------
                   2005       2004
                 --------   -------
<S>              <C>        <C>
Audit fees (1)   $118,121   $84,828
                 --------   -------
                 $118,121   $84,828
                 ========   =======
</TABLE>

(1)  Audit fees - Consists of fees billed and anticipated fees for professional
     services rendered for the audit of the Company's annual financial
     statements and review of the interim financial statements included in
     quarterly reports, and services that are normally provided by BKD LLP in
     connection with statutory and regulatory filings or engagements.


                                       26

<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.

FIRST AMERICAN CAPITAL CORPORATION


By  /s/ John F. Van Engelen                  Date  3/31/06
   ----------------------------------        -----------------------------------
   John F. Van Engelen, President
   & Chief Executive Officer
   Director


                                       27

<PAGE>

                                   SIGNATURES

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/ John F. Van Engelen                  Date  3/31/06
   ----------------------------------        -----------------------------------
   John F. Van Engelen, President &
   Chief Executive Officer Director


By  /s/ Harland E. Priddle                   Date  3/31/06
   ----------------------------------        -----------------------------------
   Harland E. Priddle, Chairman &
   Secretary Director


By  /s/ Patrick A. Tilghman                  Date  3/31/06
   ----------------------------------        -----------------------------------
   Patrick A. Tilghman, Treasurer &
   Chief Financial Officer


By  /s/ Paul E. Burke, Jr.                   Date  3/31/06
   ----------------------------------        -----------------------------------
   Paul E. Burke, Jr., Director


By  /s/ Edward C. Carter                     Date  3/31/06
   ----------------------------------        -----------------------------------
   Edward C. Carter, Director


By  /s/ Kenneth L. Frahm                     Date  3/31/06
   ----------------------------------        -----------------------------------
   Kenneth L. Frahm, Director


By  /s/ Thomas M. Fogt                       Date  3/31/06
   ----------------------------------        -----------------------------------
   Thomas M. Fogt, Director


By  /s/ John G. Montgomery                   Date  3/31/06
   ----------------------------------        -----------------------------------
   John G. Montgomery, Director


By  /s/ Gary E. Yager                        Date  3/31/06
   ----------------------------------        -----------------------------------
   Gary E. Yager, Director


                                       28

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                         Numbers
                                                                         -------
<S>                                                                      <C>
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
   for the years ended December 31, 2005 and 2004.....................      F-2
Independent Auditor's Report for the year ended
   December 31, 2003..................................................      F-3
Consolidated Balance Sheets as of December 31, 2005 and 2004..........      F-4
Consolidated Statements of Operations for the years ended
   December 31, 2005, 2004 and 2003...................................      F-6
Consolidated Statements of Comprehensive Income for the years
   ended December 31, 2005, 2004 and 2003.............................      F-7
Consolidated Statements of Changes in Shareholders' Equity for the
   years ended December 31, 2005, 2004, and 2003......................      F-8
Consolidated Statements of Cash Flows for the years ended
   December 31, 2005, 2004, and 2003..................................      F-9
Notes to Consolidated Financial Statements............................     F-11
</TABLE>
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Committee, Board of Directors and Stockholders
First American Capital Corporation

We have audited the accompanying consolidated balance sheets of First American
Capital Corporation (a Kansas corporation) as of December 31, 2005 and 2004 and
the related consolidated statements of operations, comprehensive income, changes
in shareholders' equity and cash flows for each of the two years in the period
ended December 31, 2005. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
American Capital Corporation as of December 31, 2005 and 2004 and the
consolidated results of its operations and its cash flows for each of the two
years in the period ended December 31, 2005, in conformity with accounting
principles generally accepted in the United States of America.


                                        /s/ BKD, LLP

Kansas City, Missouri
March 21, 2006, except for Note 17 as
to which the date is March 28, 2006


                                       F-2

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
First American Capital Corporation

     We have audited the accompanying consolidated statements of operations,
comprehensive income, changes in shareholders' equity, and cash flows of First
American Capital Corporation (a Kansas corporation) and subsidiary for the
period ended December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of First American Capital Corporation and subsidiary for the period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.

                                        KERBER, ECK & BRAECKEL LLP

Springfield, Illinois
March 18, 2004


                                      F-3

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                    2005          2004
                                                                -----------   -----------
<S>                                                             <C>           <C>
ASSETS
Investments:
   Securities available-for-sale, at fair value:
      Fixed maturities (amortized cost, $13,960,005
      in 2005 and $13,206,486 in 2004)                          $13,854,375   $13,479,388
      Equity securities (cost of $458,150 in 2005
         and $235,400 in 2004)                                      456,760       236,342
   Investments in real estate                                       274,564       274,564
   Policy loans                                                     103,493        86,946
   Mortgage loans on real estate                                  1,566,382       349,542
   Other investments                                              1,656,866       206,306
                                                                -----------   -----------
Total investments                                                17,912,440    14,633,088
Cash and cash equivalents                                           249,109       527,028
Accrued investment income                                           250,984       214,140
Accounts receivable                                                 272,200       258,194
Reinsurance receivables                                              78,725            --
Deferred policy acquisition costs (net of accumulated
   amortization of $3,712,369 in 2005 and $3,081,632 in 2004)     5,133,244     4,516,994
Property and equipment (net of accumulated depreciation
   of $820,415 in 2005 and $668,821 in 2004)                      2,756,025     2,775,187
Other assets                                                         24,935        30,365
                                                                -----------   -----------
Total assets                                                    $26,677,662   $22,954,996
                                                                ===========   ===========
</TABLE>

See notes to consolidated financial statements.


                                       F-4

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                     CONSOLIDATED BALANCE SHEETS (continued)

                           DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                  2005          2004
                                                              -----------   -----------
<S>                                                           <C>           <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy and contract liabilities:
   Future annuity benefits                                    $10,301,546   $ 6,806,430
   Future policy benefits                                       5,267,805     4,149,304
   Liability for policy claims                                    190,050       112,906
   Policyholder premium deposits                                  146,354       186,971
   Deposits on pending policy applications                          9,361         9,668
   Reinsurance premiums payable                                   107,334        23,120
   Amounts held under reinsurance                                 219,079            --
                                                              -----------   -----------
Total policy and contract liabilities                          16,241,529    11,288,399
Commissions, salaries, wages and benefits payable                 131,873       103,944
Other liabilities                                                 180,086       200,870
Notes payable                                                   2,272,986     1,791,607
Deferred federal income taxes payable                             527,941       603,489
                                                              -----------   -----------
Total liabilities                                              19,354,415    13,988,309

Shareholders' equity:
Common stock, $.10 par value, 8,000,000 shares authorized;
   5,449,578 shares issued and 4,257,057 shares outstanding
   in 2005; and 5,449,578 issued and 4,688,078  shares
   outstanding in 2004                                            544,958       544,958
Additional paid in capital                                     12,478,903    12,380,716
Accumulated deficit                                            (3,496,404)   (2,795,775)
Accumulated other comprehensive income (loss)                     (84,862)      220,454
Less: Treasury stock held at cost (1,192,521 shares in 2005
   and 761,500 in 2004)                                        (2,119,348)   (1,383,666)
                                                              -----------   -----------
Total shareholders' equity                                      7,323,247     8,966,687
                                                              -----------   -----------
Total liabilities and shareholders' equity                    $26,677,662   $22,954,996
                                                              ===========   ===========
</TABLE>

See notes to consolidated financial statements.


                                       F-5
<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                2005          2004          2003
                                            -----------   -----------   -----------
<S>                                         <C>           <C>           <C>
Revenues:
   Gross premium income                     $ 4,200,579   $ 3,640,557   $ 3,657,862
   Reinsurance premiums assumed                  12,240        10,816         5,943
   Reinsurance premiums ceded                  (419,660)     (117,761)     (126,531)
                                            -----------   -----------   -----------
      Net premium income                      3,793,159     3,533,612     3,537,274
   Net investment income                        867,303       517,486       558,418
   Net realized investment gain (loss)           (1,836)      463,787         4,820
   Rental income                                201,008       182,553       213,457
   Other income                                     868            38            --
                                            -----------   -----------   -----------
      Total revenue                           4,860,502     4,697,476     4,313,969

Benefits and expenses:
   Increase in policy reserves                1,118,501     1,020,812       819,632
   Policyholder surrender values                236,594       135,518       127,142
   Interest credited on annuities and
      premium deposits                          405,778       344,918       304,283
   Death claims                                 506,750       288,741       251,389
   Commissions                                1,200,741     1,059,798     1,235,074
   Policy acquisition costs deferred         (1,246,987)   (1,275,646)   (1,453,440)
   Amortization of deferred policy
      acquisition costs                         630,737       769,611       629,068
   Salaries, wages, and employee benefits     1,234,824     1,119,185     1,150,230
   Miscellaneous taxes                          137,886       171,886       131,922
   Other operating costs and expenses         1,336,307     1,359,969     1,845,155
                                            -----------   -----------   -----------
      Total benefits and expenses             5,561,131     4,994,792     5,040,455
                                            -----------   -----------   -----------
Loss before income tax expense                 (700,629)     (297,316)     (726,486)
                                            -----------   -----------   -----------
Income tax expense (benefit)                         --       (64,380)     (240,486)
                                            -----------   -----------   -----------
Net loss                                    $  (700,629)  $  (232,936)  $  (486,000)
                                            ===========   ===========   ===========
Net loss per common share - basic and
   diluted                                  $     (0.16)  $     (0.05)  $     (0.10)
                                            ===========   ===========   ===========
</TABLE>

See notes to consolidated financial statements.


                                       F-6

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                        2005         2004        2003
                                                                    -----------   ---------   ---------
<S>                                                                 <C>           <C>         <C>
Net loss                                                            $  (700,629)  $(232,936)  $(486,000)

Unrealized gain (loss) on available-for-sale securities:
   Unrealized holding gain (loss) during the period                    (382,700)    138,928     (60,789)
   Less: Reclassification for gains (loss) included in net income        (1,836)    463,787       4,820
   Tax benefit (expense)                                                 75,548      93,011      86,113
                                                                    -----------   ---------   ---------
Other comprehensive income (loss)                                      (305,316)   (231,848)     20,504
                                                                    -----------   ---------   ---------
Comprehensive loss                                                  $(1,005,945)  $(464,784)  $(465,496)
                                                                    ===========   =========   =========
Comprehensive loss per common share-basic and diluted               $     (0.23)  $   (0.10)  $   (0.10)
                                                                    ===========   =========   =========
</TABLE>

See notes to consolidated financial statements.


                                       F-7

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                           CONSOLIDATED STATEMENTS OF
                         CHANGES IN SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                     2005          2004          2003
                                                                 -----------   -----------   -----------
<S>                                                              <C>           <C>           <C>
COMMON STOCK:
   Balance, beginning of year                                    $   544,958   $   544,958   $   544,958
      Common shares issued                                                --            --            --
                                                                 -----------   -----------   -----------
   Balance, end of year                                              544,958       544,958       544,958

ADDITIONAL PAID IN CAPITAL:
   Balance, beginning of year                                     12,380,716    12,380,523    12,380,523
      Stock warrants issued                                           35,465            --            --
      Additional paid in capital on issuance of treasury stock        62,722            --            --
      Additional paid in capital on sale of treasury stock                --           193            --
                                                                 -----------   -----------   -----------
   Balance, end of year                                           12,478,903    12,380,716    12,380,523

ACCUMULATED DEFICIT:
   Balance, beginning of year                                     (2,795,775)   (2,562,839)   (2,076,839)
      Net loss                                                      (700,629)     (232,936)     (486,000)
                                                                 -----------   -----------   -----------
   Balance, end of year                                           (3,496,404)   (2,795,775)   (2,562,839)

ACCUMULATED OTHER COMPREHENSIVE INCOME:
   Balance, beginning of year                                        220,454       452,302       431,798
      Other comprehensive income                                    (305,316)     (231,848)       20,504
                                                                 -----------   -----------   -----------
   Balance, end of year                                              (84,862)      220,454       452,302

TREASURY STOCK:
   Balance, beginning of year                                     (1,383,666)   (1,385,483)   (1,385,483)
      Purchase of 450,500 common shares at $1.71 per share          (770,355)           --            --
      Issuance of 19,479 shares at cost of $1.78 per share            34,673            --            --
      Sale of 1,000 shares at cost of $1.82 per share                     --         1,817            --
                                                                 -----------   -----------   -----------
   Balance, end of year                                           (2,119,348)   (1,383,666)   (1,385,483)
                                                                 -----------   -----------   -----------
Total shareholders' equity                                       $ 7,323,247   $ 8,966,687   $ 9,429,461
                                                                 ===========   ===========   ===========
</TABLE>

See notes to consolidated financial statements.


                                       F-8
<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                 2005          2004           2003
                                                             -----------   -----------    -----------
<S>                                                          <C>           <C>            <C>
OPERATING ACTIVITIES:
Net loss                                                     $  (700,629)  $  (232,936)   $  (486,000)
Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
   Interest credited on annuities and premium deposits           405,778       344,918        304,283
   Net realized investment (gain) loss                             1,836      (463,787)        (4,820)
   Provision for depreciation                                    154,301       132,902        124,093
   Equity loss in investment in affiliate                             --        28,516         46,049
   Settlement loss                                                35,465            --             --
   Amortization of premium and accretion of discount on
      fixed maturity and short-term investments                   25,958       138,001         87,980
   Realized net loss on disposal of assets                            --            --          2,179
   Provision for deferred federal income taxes                        --       (64,380)      (219,401)
   Decrease in accrued investment income                         (36,844)      (33,071)        (3,471)
   (Increase) decrease in accounts receivable                    (14,006)       38,172         26,055
   Increase in reinsurance receivables                           (78,725)           --             --
   Acquisition costs capitalized                              (1,246,987)   (1,275,646)    (1,453,440)
   Amortization of deferred acquisition costs                    630,737       769,611        629,068
   (Increase) decrease in policy loans                           (16,547)      (26,495)         4,560
   (Increase) decrease in other assets                             5,430       (22,717)        23,496
   Increase in future policy benefits                          1,118,501     1,020,812        819,632
   Increase in liability for policy claims                        77,144         4,888         29,347
   Decrease in deposits on pending policy applications              (307)      (22,823)      (164,522)
   Increase (decrease) in reinsurance premiums payable            84,214        (8,593)        (8,173)
   Increase in amounts held under reinsurance                    219,079            --             --
   Increase (decrease) in commissions, salaries, wages and
      benefits payable                                            27,929        50,929         (2,215)
   Increase in other liabilities                                  76,611        26,593         66,202
                                                             -----------   -----------    -----------
Net cash provided by (used in) operating activities          $   768,938   $   404,894    $  (179,098)
</TABLE>

See notes to condensed consolidated financial statements.


                                       F-9

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                          2005          2004           2003
                                                      -----------   ------------   -----------
<S>                                                   <C>           <C>            <C>
INVESTING ACTIVITIES:
   Purchase of available-for-sale fixed maturities    $(2,748,760)  $(10,022,949)  $(2,816,821)
   Sale of available-for-sale fixed maturities            400,080      6,732,704            --
   Maturity of available-for-sale fixed maturities      1,502,624      1,850,000     1,404,000
   Purchase of available-for-sale equity securities      (247,750)      (193,600)           --
   Sale of available-for-sale equity securities            25,000             --            --
   Additions to property and equipment                   (135,140)       (71,275)      (12,440)
   Dispositions of property and equipment                      --             --         1,400
   Purchase of other investments                       (1,520,232)      (202,760)           --
   Maturity of other investments                          134,416             --            --
   Purchase of investments in affiliate                        --        (11,500)      (21,500)
   Dispositions of investments in affiliate                    --         48,184            --
   Purchase of mortgage loans                          (1,244,600)      (350,000)           --
   Payments received on mortgage loans                     27,760            458            --
   Payments on notes receivable                                --         13,741        14,463
   Purchases of short-term investments                         --     (3,925,512)     (466,312)
   Sale or maturity of short-term investments                  --      4,375,507       415,000
                                                      -----------   ------------   -----------
Net cash used in investing activities                  (3,806,602)    (1,757,002)   (1,482,210)

FINANCING ACTIVITIES:
   Proceeds from note payable                             570,355             --            --
   Payments on notes payable                              (88,976)       (51,400)      (45,837)
   Deposits on annuity contracts                        3,754,742      1,839,573     1,840,681
   Surrenders on annuity contracts                       (658,617)      (269,794)     (120,606)
   Policyholder premium deposits                           23,938         22,472        46,858
   Withdrawals on policyholder premium deposits           (71,342)       (61,514)      (62,061)
   Purchase of treasury stock                            (770,355)            --            --
   Proceeds from sale of treasury stock                        --          2,010            --
                                                      -----------   ------------   -----------
Net cash provided by financing activities               2,759,745      1,481,347     1,659,035
                                                      -----------   ------------   -----------
(Decrease) Increase in cash and cash equivalents         (277,919)       129,239        (2,273)
Cash and cash equivalents, beginning of period            527,028        397,789       400,062
                                                      -----------   ------------   -----------
Cash and cash equivalents, end of period              $   249,109   $    527,028   $   397,789
                                                      ===========   ============   ===========

SUPPLEMENTAL DISCLOSURE OF CASH ACTIVITIES:
   Interest paid                                      $   105,084   $    111,004   $   123,449
                                                      ===========   ============   ===========
   Income taxes paid                                  $        --   $         --   $        --
                                                      ===========   ============   ===========

SCHEDULE OF NON-CASH INVESTING TRANSACTIONS:
   Issuance of treasury stock                         $    97,395   $         --   $        --
                                                      ===========   ============   ===========
</TABLE>

See notes to consolidated financial statements.


                                      F-10

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

First American Capital Corporation (the "Company") is a financial services
holding company located in Topeka, Kansas. Subsidiaries of the Company include
First Life America Corporation ("FLAC") and First Life Brokerage, Inc. ("FLBI").
FLAC is primarily engaged in the business of marketing, underwriting and
distributing a broad range of individual life and annuity insurance products to
individuals in eight states. FLBI operates as an insurance broker offering
products underwritten by other companies and complementary to those offered by
FLAC. FLBI was capitalized effective June 29, 2005 with $25,000 and is a direct
subsidiary of the Company. Approximately 54% of the Company's total
policyholders are located in the State of Kansas.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP"), which for FLAC, differ from statutory accounting practices
prescribed or permitted by the Kansas Insurance Department ("KID").

Certain amounts from prior years have been reclassified to conform with the
current year's presentation. These reclassifications had no effect on previously
reported net income or shareholders' equity.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts and
operations of the Company and its subsidiaries, FLAC and FLBI. All intercompany
accounts and transactions are eliminated in consolidation.

Management's 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 amounts reported in the financial
statements and accompanying notes. As more information becomes known, actual
results could differ from those estimates.

Investments

The Company classifies all of its fixed maturity and equity investments as
available-for-sale. Available-for-sale fixed maturities are carried at fair
value with unrealized gains and losses, net of applicable taxes, reported in
other comprehensive income. Equity securities are carried at fair value with
unrealized gains and losses, net of applicable taxes, reported in other
comprehensive income. Mortgage loans on real estate are carried at cost less
principal payments. Other investments are carried at amortized cost. Discounts
originating at the time of purchase, net of capitalized acquisition costs, are
amortized using the level yield method on an individual basis over the remaining
contractual term of the investment. Policy loans are carried at unpaid balances.
Cash equivalents consist of highly liquid investments with maturities of three
months or less at the date of purchase and are carried at cost, which
approximates fair value. Realized gains and losses on sales of investments are
recognized in operations on the specific identification basis. Interest earned
on investments is included in net investment income. Investments in related
parties are reported using the equity method (see Note 5).


                                      F-11

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Deferred Policy Acquisition Costs

Commissions and other costs of acquiring life insurance, which vary with, and
are primarily related to, the production of new business have been deferred to
the extent recoverable from future policy revenues and gross profits. The
acquisition costs are being amortized over the premium paying period of the
related policies using assumptions consistent with those used in computing
policy reserves.

Property and Equipment

Property and equipment, including the home office building (see Note 6), are
carried at cost less accumulated depreciation. Accumulated depreciation on the
office building and land improvements is calculated using the straight-line
method over the estimated useful lives of the respective assets. Accumulated
depreciation on furniture, fixtures and equipment is calculated using the 200%
declining balance method over the estimated useful lives of the respective
assets. The estimated useful lives are generally as follows:

<TABLE>
<S>                                 <C>
Building and capitalized interest   39 years
Land improvements                   15 years
Furniture, fixtures and equipment   3 to 7 years
</TABLE>

Future Annuity Benefits

Annuity contract liabilities are computed using the retrospective deposit method
and consist of policy account balances before deduction of surrender charges,
which accrue to the benefit of policyholders. Premiums received on annuity
contracts are recognized as an increase in a liability rather than premium
income. Interest credited on annuity contracts is recognized as an expense. The
range of interest crediting rates for annuity products was 4.25 to 5.35 percent
in 2005 and 4.75 to 6.00 percent in 2004.

Future Policy Benefits

Traditional life insurance policy benefit liabilities are computed on a net
level premium method using assumptions with respect to current yield, mortality,
withdrawal rates, and other assumptions deemed appropriate by the Company.
Reserve interest assumptions, including the impact of grading for possible
adverse deviations, ranged from 4.50 to 7.25 percent.

Liability for Policy Claims

Policy claim liabilities represent the estimated liabilities for claims reported
plus claims incurred but not yet reported. The liabilities are subject to the
impact of actual payments and future changes in claim factors.

Policyholder Premium Deposits

Policyholder premium deposits represent premiums received for the payment of
future premiums on existing policyholder contracts. Interest is credited on
these deposits at the rate of 4% in 2005 and 2004. The premium deposits are
recognized as an increase in a liability rather than premium income. Interest
credited on the premium deposits is recognized as an expense.

Treasury Stock

Treasury stock is held at cost. Issuances of treasury stock are recorded based
on the average cost method.


                                      F-12

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Premiums

For limited payment and other traditional life insurance policies, premium
income is reported as earned when due. Profits are recognized over the life of
these contracts by associating benefits and expenses with insurance in force for
limited payment policies and with earned premiums for other traditional life
policies. This association is accomplished by a provision for liability for
future policy benefits and the amortization of policy acquisition costs.

Federal Income Taxes

The Company uses the liability method of accounting for income taxes. Deferred
income taxes are provided for cumulative temporary differences between balances
of assets and liabilities determined under accounting principles generally
accepted in the United States of America and balances determined for tax
reporting purposes.

Reinsurance

Estimated reinsurance receivables are reported as assets and are recognized in a
manner consistent with the liabilities related to the underlying reinsured
contracts, in accordance with SFAS No. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts."

Net Earnings (Loss) Per Common Share

Net income (loss) per common share for basic and diluted earnings per share is
based upon the weighted average number of common shares outstanding during each
year. The weighted average outstanding common shares were 4,313,774, 4,687,086,
and 4,687,078 for the years ended December 31, 2005, 2004 and 2003,
respectively.

Comprehensive Income

SFAS No. 130 requires unrealized gains and losses on the Company's
available-for-sale securities to be recorded as a component of accumulated other
comprehensive income. Unrealized gains and losses recognized in accumulated
other comprehensive income that are later recognized in net income through a
reclassification adjustment are identified on the specific identification
method.

New Accounting Pronouncements

In March 2004, the Emerging Issues Task Force reached further consensus on Issue
No. 03-1 "The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments" ("EITF 03-1"). EITF 03-1 provides guidance for determining
the meaning of "other-than-temporarily impaired" and its application to certain
debt and equity securities within the scope of Statement of Financial Accounting
Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115") and investments accounted for under the cost method.
The guidance requires that investments which have declined in value due to
credit concerns or solely due to changes in interest rates must be recorded as
other-than-temporarily impaired unless the Corporation can assert and
demonstrate its intention to hold the security for a period of time sufficient
to allow for a recovery of fair value up to or beyond the cost of the
investment, which might mean maturity. This issue also requires disclosures
assessing the ability and intent to hold investments in instances in which an
investor determines that an investment with a fair value less than cost is not
other-than-temporarily impaired.


                                      F-13
<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The guidance in EITF 03-1 was effective for other-than-temporary impairment
evaluations made in reporting periods beginning after June 15, 2004. However,
the guidance contained in paragraphs 10-20 of this Issue in EITF Abstracts has
been delayed by Financial Accounting Standards Board (FASB) Staff Position (FSP)
EITF Issue 03-1-1, "The Effective Date of Paragraphs 10-20 of EITF Issue No.
03-1, 'The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments,'" posted on September 30, 2004. At the November 2004
meeting, the FASB staff indicated that the Board is expected to undertake a
comprehensive reconsideration of the guidance in EITF 03-1 and that the
measurement and recognition guidance in paragraphs 10-20 of that Issue continue
to be deferred by FSP EITF Issue 03-1-1. However, other provisions of EITF 03-1,
including its disclosure requirements, have not been deferred. The disclosure
requirements continue to be effective in annual financial statements for fiscal
years ending after December 15, 2003, for investments accounted for under FASB
Statements of Financial Accounting Standards 115 and 124. For all other
investments within the scope of this Issue, the disclosures continue to be
effective in annual financial statements for fiscal years ending after June 15,
2004.

In June 2005, the FASB decided not to provide additional guidance on the meaning
of other-than-temporary impairment, but directed the staff to issue proposed FSP
EITF 03-1-a, "Implementation Guidance for the Application of Paragraph 16 of
EITF Issue No. 03-1," as final. The final FSP will supersede EITF 03-1 and EITF
Topic No. D-44, "Recognition of Other-Than-Temporary Impairment upon the Planned
Sale of a Security Whose Cost Exceeds Fair Value." The final FSP (retitled FSP
FAS 115-1, "The Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments") will replace the guidance set forth in paragraphs 10-18
of Issue 03-1 with references to existing other-than-temporary impairment
guidance, such as FASB Statement No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", SEC Staff Accounting Bulletin No. 59, "Accounting
for Noncurrent Marketable Equity Securities", and APB Opinion No. 18, "The
Equity Method of Accounting for Investments in Common Stock." FSP FAS 115-1 will
codify the guidance set forth in EITF Topic D-44 and clarify that an investor
should recognize an impairment loss no later than when the impairment is deemed
other-than-temporary, even if a decision to sell has not been made. The FASB
decided that FSP FAS 115-1 would be effective for other-than-temporary
impairment analysis conducted in periods beginning after September 15, 2005. The
FASB directed the staff to proceed to a draft of a final FSP for vote by written
ballot.

In September 2005, the FASB decided to include in the final draft of FASB Staff
Position FSP FAS 115-1 guidance similar to that provided in EITF 03-1 regarding
the accounting for debt securities subsequent to an other-than-temporary
impairment. The Board also decided to add a footnote to clarify that the final
FSP will not address when a debt security should be designated as nonaccrual or
how to subsequently report income on a nonaccrual debt security. In addition,
the Board decided that (1) the FSP would be applied prospectively, and (2) the
effective date would be reporting periods beginning after December 15, 2005. The
new standard is not expected to have a material impact on the consolidated
financial statements.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154
"Accounting Changes and Error Corrections" ("FAS 154"). The Statement replaces
APB Opinion No. 20 and FAS 3. FAS 154 requires retrospective application to
prior periods' financial statements of changes in accounting principle. However,
if it is impracticable to determine the effects of such changes, then other
rules apply. FAS 154 is effective January 1, 2006. Currently, the Company is not
aware of any circumstances that require the application of FAS 154, and there is
no anticipated impact on the consolidated financial statements.


                                      F-14

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In September 2005, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (AcSEC) issued Statement of Position
05-1 (SOP 05-1), "Accounting by Insurance Enterprises for Deferred Acquisition
Costs in Connection with Modifications or Exchanges of Insurance Contracts". SOP
05-1 provides guidance on accounting by insurance enterprises for deferred
acquisition costs on internal replacements of insurance contracts other than
those specifically described in Statement of Financial Accounting Standards
(SFAS) No. 97, "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of
Investments". SOP 05-1 defines an internal replacement as a modification in
product benefits, features, rights, or coverages that occurs by exchange of a
contract for a new contract, or by amendment, endorsement, or rider to a
contract, or by the election of a feature or coverage within a contract. SOP
05-1 is effective for internal replacements occurring in fiscal years beginning
after December 31, 2006. Retrospective application of SOP 05-1 to previously
issued consolidated financial statements is not permitted. The Company is
continuing to evaluate SOP 05-1 but does not believe that it will have a
material impact on the consolidated financial statements.

All other Standards and Interpretations of those Standards issued during 2005
did not relate to accounting policies and procedures pertinent to the Company at
this time.

3.   INVESTMENTS

The amortized cost and fair value of investments at December 31, 2005 and 2004
are summarized as follows:

<TABLE>
<CAPTION>
                                            Gross        Gross
                            Amortized    Unrealized   Unrealized       Fair
                               Cost         Gains       Losses        Value
                           -----------   ----------   ----------   -----------
<S>                        <C>           <C>          <C>          <C>
December 31, 2005:
U.S. Government Agency     $ 1,408,079    $ 16,891     $ 14,026    $ 1,410,944
Corporate bonds             12,551,926     223,559      332,054     12,443,431
                           -----------    --------     --------    -----------
Total                      $13,960,005    $240,450     $346,080    $13,854,375
                           ===========    ========     ========    ===========
Equity securities          $   458,150    $ 22,005     $ 23,395    $   456,760
                           ===========    ========     ========    ===========
December 31, 2004:
U.S. Government Agency     $ 1,848,071    $ 47,607     $  1,930    $ 1,893,748
Corporate bonds             11,358,415     308,061       80,836     11,585,640
                           -----------    --------     --------    -----------
Total                      $13,206,486    $355,668     $ 82,766    $13,479,388
                           ===========    ========     ========    ===========
Equity securities          $   235,400    $  5,992     $  5,050    $   236,342
                           ===========    ========     ========    ===========
</TABLE>

The amortized cost and fair value of fixed maturities at December 31, 2005, by
contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because certain borrowers may have the right to call or
prepay obligations.


                                      F-15

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.   INVESTMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                          Amortized        Fair
                                             Cost         Value
                                         -----------   -----------
<S>                                      <C>           <C>
Due in one year or less                  $   879,539   $   872,709
Due after one year through five years      2,475,681     2,491,692
Due after five years through ten years     4,767,642     4,692,797
Due after ten years                        5,837,143     5,797,176
                                         -----------   -----------
                                         $13,960,005   $13,854,375
                                         ===========   ===========
</TABLE>

The fair values for investments in fixed maturities are based on quoted market
prices.

Included in investments are securities, which have been pledged to various state
insurance departments. The fair values of these securities were $2,120,855 and
$2,285,263 at December 31, 2005 and 2004, respectively.

During 2005, the Company had gross realized investment gains of $3,211.
Investment gains were $464,363 and $4,820 during 2004 and 2003, respectively.
During 2005, the Company had gross realized investment losses of $5,047. Gross
realized investment losses totaled $576 and $0 in 2004 and 2003, respectively.

During 2004, the Company commenced purchasing investments in lottery prize cash
flows. These other investments involve purchasing assignments of the future
payment rights from the lottery winners at a discounted price sufficient to meet
the Company's yield requirements. Payments on these other investments will be
made by state run lotteries and as such are backed by the general credit of the
respective state. At December 31, 2005 and 2004 the carrying value of other
investments was $1,656,866 and $206,306, respectively.

Investment income consists of dividends and interest earned on notes receivable,
policy loans, available-for-sale securities, mortgage loans, and other
investments.

Following are the components of net investment income for the years ended
December 31, 2005, 2004 and 2003:

<TABLE>
<CAPTION>
                                                  Years ended December 31,
                                               ------------------------------
                                                 2005       2004       2003
                                               --------   --------   --------
<S>                                            <C>        <C>        <C>
Fixed maturities                               $713,645   $509,933   $549,369
Equity securities                                18,666         70         --
Notes receivables                                    --        238      1,697
Mortgage loans on real estate                    66,625      2,275         --
Equity loss on investment in related parties         --    (28,516)   (46,049)
Short-term and other investments                 90,007     43,798     57,019
                                               --------   --------   --------
Gross investment income                         888,943    527,798    562,036
Investment expenses                             (21,640)   (10,312)    (3,618)
                                               --------   --------   --------
Net investment income                          $867,303   $517,486   $558,418
                                               ========   ========   ========
</TABLE>


                                      F-16

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS (CONTINUED)

The Company has a policy and process in place to identify securities that could
potentially have an impairment that is other-than-temporary. This process
involves monitoring market events that could impact issuers' credit ratings,
business climate, management changes, litigation and government actions, and
other similar factors. At the end of each quarter, all securities are reviewed
in an effort to determine each issuer's ability to service its debts and the
length of time the security has been trading below cost. This quarterly process
includes an assessment of the credit quality of each investment in the entire
securities portfolio. The Company considers relevant facts and circumstances in
evaluating whether the impairment of a security is other-than-temporary.
Relevant facts and circumstances considered include (1) the length of time the
fair value has been below cost; (2) the financial position of the issuer,
including the current and future impact of any specific events; and (3) the
Company's ability and intent to hold the security to maturity or until it
recovers in value. Based on the performance of these procedures, no securities
are deemed to be other-than-temporarily impaired by the Company.

There are a number of significant risks and uncertainties inherent in the
process of monitoring impairments and determining if an impairment is
other-than-temporary. These risks and uncertainties include (1) the risk that
the Company's assessment of an issuer's ability to meet all of its contractual
obligations will change based on changes in the credit characteristics of that
issuer, (2) the risk that the economic outlook will be worse than expected or
have more of an impact on the issuer than anticipated, (3) the risk that
fraudulent information could be provided to the Company's investment
professionals who determine the fair value estimates and other-than-temporary
impairments, and (4) the risk that new information obtained by the Company or
changes in other facts and circumstances lead the Company to change its intent
to hold the security to maturity or until it recovers in value. Any of these
situations could result in a charge to income in a future period.

The following tables provide information regarding unrealized losses on
investments available for sale, as of December 31, 2005 and 2004.

<TABLE>
<CAPTION>
                           Less than 12 months       12 months or longer              Total
                         -----------------------   -----------------------   -----------------------
                            Fair      Unrealized      Fair      Unrealized      Fair      Unrealized
                            Value       Losses        Value       Losses        Value       Losses
                         ----------   ----------   ----------   ----------   ----------   ----------
<S>                      <C>          <C>          <C>          <C>          <C>          <C>
December 31, 2005:
U.S. Government Agency   $  598,965    $ 11,324    $   96,879    $  2,702    $  695,844    $ 14,026
Corporate bonds           6,047,377     212,041     1,414,230     120,013     7,461,607     332,054
                         ----------    --------    ----------    --------    ----------    --------
Total                    $6,646,342    $223,365    $1,511,109    $122,715    $8,157,451    $346,080
                         ==========    ========    ==========    ========    ==========    ========
Equity securities        $   47,980    $     20    $  126,275    $ 23,375    $  174,255    $ 23,395
                         ==========    ========    ==========    ========    ==========    ========
</TABLE>

<TABLE>
<CAPTION>
                           Less than 12 months       12 months or longer              Total
                         -----------------------   -----------------------   -----------------------
                            Fair      Unrealized      Fair      Unrealized      Fair      Unrealized
                            Value       Losses        Value       Losses        Value       Losses
                         ----------   ----------   ----------   ----------   ----------   ----------
<S>                      <C>          <C>          <C>          <C>          <C>          <C>
December 31, 2004:
U.S. Government Agency   $  401,058     $   702     $447,332      $1,228     $  848,390     $ 1,930
Corporate bonds           3,656,639      74,449      522,168       6,387      4,178,807      80,836
                         ----------     -------     --------      ------     ----------     -------
Total                    $4,057,697     $75,151     $969,500      $7,615     $5,027,197     $82,766
                         ==========     =======     ========      ======     ==========     =======
Equity securities        $  144,600     $ 5,050     $     --      $   --     $  144,600     $ 5,050
                         ==========     =======     ========      ======     ==========     =======
</TABLE>


                                      F-17

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. CONCENTRATIONS OF CREDIT RISK

Credit risk is limited by emphasizing investment grade securities and by
diversifying the investment portfolio among various investment instruments.
Certain cash balances exceed the maximum insurance protection of $100,000
provided by the Federal Deposit Insurance Corporation. However, the cash
balances exceeding this maximum are protected through additional insurance. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash and cash equivalents.

5. INVESTMENTS IN RELATED PARTIES

Effective August 26, 2004, the Company purchased the remaining 50% joint venture
interest in First Computer Services, LLC ("FCS") from First Alliance Corporation
("FAC") of Lexington, Kentucky. FCS owned the accounting hardware and software
that operates the Company's policy administration, underwriting, claim
processing, and accounting system. The aggregate purchase price for the
remaining interest was $80,547, consisting of a single cash payment to FAC of
$57,547 and the assumption of a $23,000 liability of FAC to FCS. The fair value
of the remaining interest acquired was $48,184 consisting of 50% interests in
computer hardware and software and an operating cash balance. The resulting loss
of $32,363, representing the difference between the aggregate purchase price and
the fair value of the remaining interest acquired, was included in other
operating costs and expenses for 2004. Following the purchase of the remaining
interest, FCS was dissolved with all assets being transferred to the Company.

Prior to the dissolution of FCS, the Company recorded its 50% investor share of
joint venture losses using the equity method of accounting. The Company's share
of joint venture losses totaled $28,516 and $46,049 for the years ended December
31, 2004 and 2003, respectively. These amounts were included in net investment
income. As of December 31, 2005 and 2004, the carrying value of the FCS
investment was $0.

6. PROPERTY AND EQUIPMENT

The Company owns approximately six and one-half acres of land located in Topeka,
Kansas. A 20,000 square foot office building has been constructed on
approximately one-half of this land. The remaining land, including improvement
costs, is classified as real estate held for investment. The Company occupies
approximately 7,500 square feet of the building and the remaining 12,500 square
feet is leased (see Note 7).

<TABLE>
<CAPTION>
                                                      2005         2004
                                                   ----------   ----------
<S>                                                <C>          <C>
Land and improvements                              $  357,675   $  357,675
Building and capitalized interest                   2,605,330    2,605,330
Furniture, fixtures and equipment                     510,063      481,003
Tenant improvements                                   103,372           --
                                                   ----------   ----------
Total property and equipment                        3,576,440    3,444,008
Less - accumulated depreciation and amortization     (820,415)    (668,821)
                                                   ----------   ----------
Net property and equipment                         $2,756,025   $2,775,187
                                                   ==========   ==========
</TABLE>


                                      F-18

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. LEASES

The Company owns a 20,000 square foot office building and occupies approximately
7,500 square feet. The Company has leased 10,000 square feet under a lease that
commenced on July 1, 2001 and will end on June 30, 2006. The lease will
automatically renew if not terminated on or after June 15, 2006 for another five
years.

Effective August 29, 2005, the Company executed a lease agreement with a tenant
for the remaining 2,500 square feet of vacant space. The base lease period
commenced on September 1, 2005 and will end on August 31, 2010. The lease will
automatically renew if not terminated on or after August 15, 2010 for another
five years. The lease agreement calls for minimum monthly base lease payments of
$4,332 for the period September 1, 2005 through August 31, 2010. The lease
payments will decrease to $3,100 per month for the period September 1, 2010
through August 31, 2015. In conjunction with the execution of the lease
agreement, the Company incurred $103,372 in tenant improvement costs to prepare
the space for lease. These costs are being depreciated on a straight line basis
over the base lease term of five years.

The future minimum lease payments to be received under non cancelable lease
agreements at December 31, 2005 are approximately as follows:

<TABLE>
<CAPTION>
Year Ending
December 31,    Amount
------------   --------
<S>            <C>
    2006        144,106
    2007         51,984
    2008         51,984
    2009         51,984
    2010         34,656
               --------
   Total       $334,714
               ========
</TABLE>

8. FEDERAL INCOME TAXES

Effective June 30, 2003, the Company commenced calculating deferred taxes based
on a consolidated income tax return approach. The impact of this change in
accounting estimate is reflected in the year ended December 31, 2003 summary of
operations. Income tax expense was reduced by $347,412, or $.07 per share, for
the year ended December 31, 2003, resulting in an income tax benefit of $240,486
for the year ended December 31, 2003.

The Company has elected to file a consolidated federal income tax return with
FLAC and FLBI for the year ended December 31, 2005 and filed a consolidated
federal income tax return with FLAC for the years ended December 31, 2004 and
2003. FLAC is taxed as a life insurance company under the provisions of the
Internal Revenue Code and had to file a separate tax return for its initial five
years of existence. Federal income tax expense for the years ended December 31,
2005, 2004, and 2003 consisted of the following:

<TABLE>
<CAPTION>
                                         Years ended December 31,
                                       ---------------------------
                                       2005     2004        2003
                                       ----   --------   ---------
<S>                                    <C>    <C>        <C>
Current                                 $--   $     --   $ (21,089)
Deferred                                 --    (64,380)   (219,397)
                                        ---   --------   ---------
Federal income tax (benefit) expense    $--   $(64,380)  $(240,486)
                                        ===   ========   =========
</TABLE>


                                      F-19
<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. FEDERAL INCOME TAXES (CONTINUED)

Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate for 2005, 2004 and 2003 as follows:


<TABLE>
<CAPTION>
                                                              Years ended December 31,
                                                         ---------------------------------
                                                            2005        2004        2003
                                                         ---------   ---------   ---------
<S>                                                      <C>         <C>         <C>
Federal income tax expense (benefit) at statutory rate   $(238,213)  $(101,088)  $(247,005)
Small life insurance company deduction                     (36,106)    (64,975)    (51,616)
Increase in valuation allowance                            273,190     100,202     234,152
Income tax recoverable from NOL carryback                       --          --     (21,089)
Other                                                        1,129       1,481    (154,928)
                                                         ---------   ---------   ---------
Federal income tax (benefit) expense                     $      --   $ (64,380)  $(240,486)
                                                         =========   =========   =========
</TABLE>

Deferred federal income taxes reflect the impact of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. Significant components
of the Company's net deferred tax liability are as follows:

<TABLE>
<CAPTION>
                                              December 31,
                                       -------------------------
                                           2005          2004
                                       -----------   -----------
<S>                                    <C>           <C>
Deferred tax liability:
   Due premiums                        $    11,832   $    10,659
   Deferred policy acquisition costs       868,699       761,870
   Accrual of discount                       5,387         4,253
   Net unrealized investment gain               --        53,385
                                       -----------   -----------
Total deferred tax liability               885,918       830,167
Deferred tax asset:
   Policy reserves                          92,810        74,607
   Reinsurance premiums                      3,514         4,624
   Net operating loss carryforward       2,217,307     1,852,075
   Net unrealized investment loss           22,164            --
                                       -----------   -----------
Total deferred tax asset                 2,335,795     1,931,306
Valuation allowance                     (1,977,818)   (1,704,628)
                                       -----------   -----------
Net deferred tax asset                     357,977       226,678
                                       -----------   -----------
Net deferred tax liability             $   527,941   $   603,489
                                       ===========   ===========
</TABLE>

The Company has net operating loss carryforwards of approximately $6,931,709 on
a consolidated basis. Net operating loss carryforwards of $799,241 resulted from
non-life insurance operations and were generated prior to the base period for
tax consolidation purposes. These loss carryforwards expire in 2011 and 2012 and
can only be used to offset taxable income resulting from non-life insurance
operations. Net operating loss carryforwards of $5,136,220 resulted from
non-life insurance operations and were generated either during or subsequent to
the base period for tax consolidation purposes. These loss carryforwards expire
in 2018 through 2025 and can be used to offset either taxable income resulting
from non-life insurance operations or 35% of taxable income resulting from life
insurance operations. Net operating loss carryforwards of $996,248 resulted from
life insurance operations and were generated either during or subsequent to the
base period for tax consolidation purposes. These loss carryforwards expire in
2022 through 2025.


                                      F-20

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. NOTES PAYABLE

The Company maintained a $1,736,671 note to Vision Bank as of December 31, 2005.
The note is secured by the home office building. The note will mature on April
22, 2013. The note is payable in 120 monthly payments of $13,534 each with a
final payment of the unpaid principal balance and interest on April 22, 2013.
Interest will be accrued at 6% until April 22, 2008 at which time the rate may
change. The interest rate change will be the Wall Street Journal Prime Rate of
Interest, subject to a floor of 6% and a ceiling of 9.5%.

On March 2, 2005 the Company borrowed $570,355 from Brooke Credit Corporation at
a fixed interest rate of 8% over a ten year period (See Note 11). The note is
payable in 120 monthly payments of $6,897. The balance of the note at December
31, 2005 was $536,315. The Company has granted a second priority security
interest in its commercial real property and office building to secure the loan
from Brooke Credit Corp.

Required future principle payments are as follows:

<TABLE>
<CAPTION>
             Principal
   Year       Payment
   ----      ---------
<S>          <C>
      2006      99,724
      2007     106,808
      2008     114,022
      2009     122,527
      2010     131,265
Thereafter   1,698,640
             ---------
     Total   2,272,986
             =========
</TABLE>

10. SHAREHOLDERS' EQUITY AND STATUTORY ACCOUNTING PRACTICES

FLAC prepares its statutory-basis financial statements in accordance with
statutory accounting practices ("SAP") prescribed or permitted by the KID.
Currently, "prescribed" statutory accounting practices include state insurance
laws, regulations, and general administrative rules, as well as the National
Association of Insurance Commissioners ("NAIC") Accounting Practices and
Procedures Manual and a variety of other NAIC publications. "Permitted"
statutory accounting practices encompass all accounting practices that are not
prescribed; such practices may differ from state to state, may differ from
company to company within a state, and may change in the future. During 1998,
the NAIC adopted codified statutory accounting principles ("Codification").
Codification replaced the NAIC Accounting Practices and Procedures Manual and
was effective January 1, 2001. The impact of Codification was not material to
FLAC's statutory-basis financial statements.


                                      F-21

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. SHAREHOLDERS' EQUITY AND STATUTORY ACCOUNTING PRACTICES (CONTINUED)

Net income for 2005, 2004, and 2003 and capital and surplus at December 31,
2005, 2004, and 2003 for the Company's insurance operations as reported in these
financial statements prepared in accordance with GAAP as compared to amounts
reported in accordance with SAP prescribed or permitted by the KID are as
follows:

<TABLE>
<CAPTION>
                 GAAP                        SAP
       ------------------------   ------------------------
       Net Income   Capital and   Net Income   Capital and
         (loss)       Surplus       (loss)       Surplus
       ----------   -----------   ----------   -----------
<S>    <C>          <C>           <C>          <C>
2005     271,995     6,490,251     (64,575)     2,724,980
2004     528,494     6,251,955     (54,205)     2,539,348
2003     609,166     5,796,464    (253,955)     2,615,342
</TABLE>

Principal differences between GAAP and SAP include: a) costs of acquiring new
policies are deferred and amortized for GAAP; b) benefit reserves are calculated
using more realistic investment, mortality and withdrawal assumptions for GAAP;
c) statutory asset valuation reserves are not required for GAAP; and d)
available-for-sale fixed maturity investments are reported at fair value with
unrealized gains and losses reported as a separate component of shareholders'
equity for GAAP.

Statutory restrictions limit the amount of dividends, which may be paid by FLAC
to the Company. Generally, dividends during any year may not be paid without
prior regulatory approval, in excess of the lesser of (a) 10% of statutory
shareholders' surplus as of the preceding December 31, or (b) statutory net
operating income for the preceding year. In addition, FLAC must maintain the
minimum statutory capital and surplus required for life insurance companies in
those states in which it is licensed to transact life insurance business.

The KID imposes on insurance enterprises minimum risk-based capital ("RBC")
requirements that were developed by the NAIC. The formulas for determining the
amount of RBC specify various weighing factors that are applied to financial
balances or various levels of activity based on the perceived degree of risk.
Regulatory compliance is determined by ratio (the "Ratio") of the enterprises
regulatory total adjusted capital, as defined by the NAIC, to its authorized
control level RBC, as defined by the NAIC. Enterprises below specific trigger
points or ratios are classified within certain levels, each of which requires
specified corrective action. FLAC has a ratio that is in excess of the minimum
RBC requirements; accordingly, FLAC meets the RBC requirements.

11. TREASURY STOCK TRANSACTION

On March 2, 2005 the Company acquired 450,500 shares of its common stock from a
single, corporate shareholder, Brooke Corporation ("Brooke"). The Company
negotiated a purchase price of $770,355 ($1.71 per share) to include $200,000
cash at closing, with Brooke Credit Corporation, the finance subsidiary of
Brooke, financing the remainder at a fixed interest rate of 8% over a ten year
period (see Note 9). The agreement also grants Brooke three separate warrants to
purchase common stock for 50,000 shares each at prices of $1.71, $3.35 and
$5.00. The warrants are exercisable in 2012 or immediately prior to any earlier
change of control involving the Company and expire no later than 2015. The
agreement also contained covenants whereby Brooke agreed, among other things,
not to purchase additional shares of the Company's common stock or participate
in any proxy contest or other effort to take control of the Company for a period
of five years. The Company incurred a loss on the transaction in the amount of
$35,465. The loss is included in other operating costs and expenses for the year
ended December 31, 2005. The fair value of the warrants has been included in
additional paid in capital.


                                      F-22
<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. COMMITMENTS AND CONTINGENCIES

On November 12, 2003, the Company filed a petition in the District Court of
Shawnee County, Kansas asserting claims against Rickie D. Meyer ("Meyer"), the
Company's former President, arising, in part, out of Meyer's employment with the
Company. Among other things, the Company sought to recover expense
reimbursements previously paid to Meyer and Company funds allegedly
misappropriated by Meyer. On August 8, 2003, the Company settled a claim that it
had breached various marketing agreements with AF&L, a long-term care insurance
company, and certain of its affiliates, through the payment to AF&L of $150,000
plus $15,000 in attorney fees. On December 12, 2003, Meyer filed an Answer and
Counterclaim against the Company asserting claims for defamation and breach of
employment agreement. On August 1, 2005, the District Court of Shawnee County,
Kansas entered an order, by agreement, submitting the claims to binding
arbitration. Following the conclusion of the arbitration, the parties entered
into a settlement agreement in November of 2005, pursuant to which the Company
agreed to pay Meyer $38,500 and Meyer and the Company agreed to settle all
claims. The Company paid the amount to Meyer in February of 2006. This award
amount has been accrued as of December 31, 2005 and is included in other
operating costs and expenses for the year ended December 31, 2005.

13. REINSURANCE

In order to reduce the risk of financial exposure to adverse underwriting
results, insurance companies reinsure a portion of their risks with other
insurance companies. FLAC has entered into agreements with Generali USA Life
Reassurance Company ("Generali") of Kansas City, Missouri, Optimum Re Insurance
Company ("Optimum Re") of Dallas, Texas, and Wilton Reassurance Company ("Wilton
Re") of Wilton, CT, to reinsure portions of the life insurance risks it
underwrites. Pursuant to the terms of the agreements, FLAC retains a maximum
coverage exposure of $50,000 on any one insured. At December 31, 2005 and 2004,
respectively, FLAC ceded inforce amounts totaling $32,617,000 and $30,675,000 of
ordinary business and $33,235,000 and $35,695,000 of accidental death benefit
risk.

Pursuant to the terms of the agreement with Generali, FLAC generally pays no
reinsurance premiums on first year individual business. However, SFAS No. 113
requires the unpaid premium to be recognized as a first year expense and
amortized over the estimated life of the reinsurance policies. FLAC records this
unpaid premium as "reinsurance premiums payable" in the accompanying balance
sheet and as "reinsurance premiums ceded" in the accompanying income statement.
At December 31, 2005 and 2004, respectively, the unpaid reinsurance premiums net
of amortization totaled $17,570 and $ 23,120. To the extent that the reinsurance
companies are unable to fulfill their obligations under the reinsurance
agreements, FLAC remains primarily liable for the entire amount at risk.

FLAC is party to an Automatic Retrocession Pool Agreement (the "Reinsurance
Pool") with Optimum Re, Catholic Order of Foresters, American Home Life
Insurance Company and Woodmen of the World. The agreement provides for automatic
retrocession of coverage in excess of Optimum Re's retention on business ceded
to Optimum Re by the other parties to the Reinsurance Pool. FLAC's maximum
exposure on any one insured under the Reinsurance Pool is $50,000. During 2005
and 2004, respectively, FLAC assumed inforce amounts totaling $17,726,000 and
$16,630,000.

Effective September 29, 2005, the Company and Wilton Re executed a binding
letter of intent whereby both parties agreed that the Company would cede the
simplified issue version of its Golden Eagle Whole Life (Final Expense) product
to Wilton Re on a 50/50 quota share original term coinsurance basis. The letter
of intent was executed on a retroactive basis to cover all applicable business
issued by the Company subsequent to January 1, 2005. Wilton Re has agreed to
provide various commission and expense allowances to the Company in exchange for
the Company ceding 50% of the applicable premiums to Wilton Re as they are
collected. The impact of this reinsurance agreement on the consolidated
financial statements for 2005 is summarized below:


                                      F-23

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. REINSURANCE (CONTINUED)

<TABLE>
<CAPTION>
                                                      Balance                   Balance
                                                     Excluding                 Including
                                                    Reinsurance     Impact    Reinsurance
                                                    -----------   ---------   -----------
<S>                                                 <C>           <C>         <C>
Balance Sheet
Assets:
Cash and cash equivalents                           $  (185,759)  $ 434,868   $   249,109
Accounts receivable                                     273,954      (1,754)      272,200
Reinsurance receivables                                      --      78,725        78,725
Deferred policy acquisition costs                     5,545,134    (411,890)    5,133,244
                                                                  ---------
                                                                  $  99,949

Liabilities & Shareholders' Equity:
Future policy benefits                              $ 5,435,230   $(167,425)  $ 5,267,805
Liability for policy claims                             238,289     (48,239)      190,050
Reinsurance premiums payable                             17,570      89,764       107,334
Amounts held under reinsurance                               --     219,079       219,079
Deferred federal income taxes payable                   527,941          --       527,941
Shareholders' equity                                  7,316,477       6,770     7,323,247
                                                                  ---------
                                                                  $  99,949

Statement of Operations
Revenues:
Reinsurance premiums ceded                          $  (111,837)  $(307,823)  $  (419,660)
Benefits & Expenses:
Increase in policy reserves                         $ 1,285,926   $(167,425)  $ 1,118,501
Death claims                                            565,563     (58,813)      506,750
Commissions                                           1,536,672    (335,931)    1,200,741
Policy acquisition costs deferred                    (1,729,597)    482,610    (1,246,987)
Amortization of deferred policy acquisition costs       701,456     (70,719)      630,737
Miscellaneous taxes                                     145,536      (7,650)      137,886
Other operating costs and expenses                    1,492,972    (156,665)    1,336,307
                                                                  ---------
                                                                  $(314,593)
Income tax expense                                  $        --   $      --   $        --
Net income (loss)                                   $  (707,399)  $   6,770   $  (700,629)
</TABLE>

14. RELATED PARTY TRANSACTIONS

One of the Company's notes payable is financed by Vision Bank of Topeka, Kansas
(see Note 9). A Director of the Company is the President and CEO of Vision Bank.
The terms of the note payable were determined by competitive bid.


                                      F-24

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair values of financial instruments, and the methods and assumptions used
in estimating their fair values, are as follows:

Fixed Maturities

Fixed maturities are carried at fair value in the accompanying consolidated
balance sheets. The fair value of fixed maturities are based on quoted market
prices. At December 31, 2005 and 2004, the fair value of fixed maturities was
$13,854,375 and $13,479,388, respectively.

Equity Securities

Equity securities are carried at fair value in the accompanying consolidated
balance sheets. The fair value of equity securities are based on quoted market
prices. At December 31, 2005 and 2004, the fair value of equity securities was
$456,760 and $236,342, respectively.

Policy Loans

The carrying value of policy loans approximates their fair value. At December
31, 2005 and 2004, the fair value of policy loans was $103,493 and $86,946,
respectively.

Mortgage Loans on Real Estate

The carrying value of mortgage loans on real estate approximates their fair
value. At December 31, 2005 and 2004, the fair value of mortgage loans on real
estate was $1,566,382 and $349,542, respectively.

Other Investments

The carrying value of other investments approximates their fair value. At
December 31, 2005 and 2004, the fair value of other investments was $1,656,866
and $206,306, respectively.

Cash and Cash Equivalents

The carrying value of cash and cash equivalents approximates their fair value.
At December 31, 2005 and 2004, the fair value of cash and cash equivalents was
$249,109 and $527,028, respectively.

16. SEGMENT INFORMATION

The operations of the Company and its subsidiaries have been classified into two
operating segments as follows: life and annuity insurance operations (conducted
by FLAC and by the Company pursuant to the Services Agreement) and corporate
operations. The brokerage operations of FLBI are included in corporate
operations as a result of their relative insignificance to date. All sales of
life insurance by FLAC are to unaffiliated customers. Substantially all
additions to property and equipment occur at the corporate operations level.
Segment information as of December 31, 2005, 2004 and 2003 and for the years
then ended is as follows:


                                      F-25

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                               2005          2004          2003
                                           -----------   -----------   -----------
<S>                                        <C>           <C>           <C>
Revenues:
   Life and annuity insurance operations   $ 4,628,936   $ 4,293,633   $ 3,988,400
   Corporate operations                        231,566       403,843       325,569
                                           -----------   -----------   -----------
      Total                                $ 4,860,502   $ 4,697,476   $ 4,313,969
                                           ===========   ===========   ===========

Income (loss) before income taxes:
   Life and annuity insurance operations   $   271,992   $   464,114   $   368,682
   Corporate operations                       (972,621)     (761,430)   (1,095,168)
                                           -----------   -----------   -----------
      Total                                $  (700,629)  $  (297,316)  $  (726,486)
                                           ===========   ===========   ===========

Depreciation and amortization expense:
   Life and annuity insurance operations   $   630,737   $   769,611   $   629,068
   Corporate operations                        154,301       132,902       124,093
                                           -----------   -----------   -----------
      Total                                $   785,038   $   902,513   $   753,161
                                           ===========   ===========   ===========

Assets:
   Life and annuity insurance operations   $23,337,149   $18,305,111   $15,053,265
   Corporate operations                      3,340,513     4,649,885     5,625,835
                                           -----------   -----------   -----------
      Total                                $26,677,662   $22,954,996   $20,679,100
                                           ===========   ===========   ===========
</TABLE>

17. LIQUIDITY AND CAPITAL RESOURCES

During the years ended December 31, 2005, 2004, and 2003, the Company maintained
liquid assets sufficient to meet operating demands, while continuing to utilize
excess liquidity to purchase various investments. Net cash provided by (used in)
operating activities during the years ended December 31, 2005, 2004 and 2003
totaled $768,938, $404,894 and ($179,098), respectively.

As of December 31, 2005, the Company and its subsidiaries had consolidated cash
reserves and liquid investments of approximately $14,543,444, as compared with
$14,200,958 at the end of 2004 and $12,890,488 at the end of 2003. Of these
amounts, cash reserves and liquid investments at FLAC as of these dates were
approximately $14,112,878, $12,812,107, and $10,541,139, respectively. FLAC
generally receives adequate cash flow from premium collections and investment
income to meet the obligations of its insurance operations. Insurance policy
liabilities are primarily long-term and generally are paid from future cash
flows. Cash collected from deposits on annuity contracts and policyholder
premium deposits are recorded as cash flows from financing activities. Due to
insurance regulatory restrictions, as noted above, cash generated by FLAC cannot
necessarily be used to fund the cash needs of the parent company on a
stand-alone basis.

As of December 31, 2005, cash reserves and liquid investments at the parent
company level were approximately $419,540 as compared with $1,388,851 at the end
of 2004 and $2,349,349 at the end of 2003. Cash reserves at FLBI were $11,026 at
the end of 2005. Based on the decreasing level of cash reserves and liquid
investments at the parent company level over the past few years, in 2005,
management began to pursue all reasonable alternatives for increasing cash
reserves at the parent company level. As an initial step in this process, the
Board of Directors of each of the parent company and FLAC have approved a
transaction pursuant to which FLAC has agreed to purchase the Company's home
office building and the real property on which it is located from the parent
company at its value of $2,800,000, which was determined based on an independent
appraisal.


                                      F-26

<PAGE>

                       FIRST AMERICAN CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

On March 28, 2006, the KID approved this transaction pursuant to a Form D (Prior
Notice of a Transaction) filed by the Company. Proceeds from the sale will be
used by the parent company to pay off the two creditors that currently hold
mortgages on the building, thus resulting in interest savings of approximately
$890,000 over the life of the loans. In addition, the transaction will provide
the parent company with approximately $500,000 in cash. This cash will be used
to fund operations at the parent company.

Based on currently forecasted cash flow levels, management anticipates that the
$500,000 in cash provided to the parent company as a result of the
aforementioned transaction plus the parent company's existing cash reserves of
approximately $420,000 will fund operations at the parent company level into mid
2007. Therefore, in the interim, management will continue to explore all
reasonable opportunities to provide additional capital to the parent company
through the sale of new equity securities or debt securities, or through
borrowed funds. Successful efforts in this arena will not only help to remedy
the parent company's current cash situation, but also allow management to fully
implement its business development plan of expanding the Company's product lines
and marketing efforts through the infusion of additional capital into FLAC's
insurance operations and FLBI's brokerage operations. If these efforts are not
successful, however, then the Company will have no choice but to cease
operations as a public company and liquidate its assets, which primarily are the
insurance operations of its subsidiary FLAC. There is no assurance of what if
any value could be realized by the parent company in this event.

18. OTHER REGULATORY MATTERS

FLAC is currently licensed to transact life and annuity business in the states
of Kansas, Texas, Illinois, Oklahoma, North Dakota, Kentucky and Nebraska. Due
to the varied processes of obtaining admission to write business in new states,
management cannot reasonably estimate the time frame of expanding its marketing
presence.

FLAC was previously licensed to transact business in the state of Ohio. FLAC's
license in Ohio was suspended during the fourth quarter of 2005. The suspension
resulted from FLAC's statutory basis capital and surplus as of September 30,
2005 of $2,495,616 being less than the minimum required level in Ohio of
$2,500,000. As of December 31, 2005, FLAC's statutory basis capital and surplus
was $2,724,980, which is in excess of the aforementioned minimum requirement.
FLAC has appealed the suspension and expects to have its license reinstated in
2006.


                                      F-27