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

                                    FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year ended December 31, 2005

                           Commission file number ____

                              PHOTONICS CORPORATION

             (Exact name of Registrant as specified in its charter)

           California                                     77-0102343
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

   520 South Fourth Avenue, Suite 400                       (972) 745-3020
    Louisville, Kentucky 40202-2577
(Address of Principal Executive Offices)             (Issuer's telephone number)

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [X] No [ ]

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not 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-K or any  amendments  to
this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):


                                     Page 1
<PAGE>

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

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

State issuer's revenues for the most recent fiscal year: $0

The estimated  aggregate market value of the voting stock held by non-affiliates
of the  registrant  as  reported  on the OTC  Electronic  Bulletin  Board  as of
December 31, 2005 was $874,184.32 The market value is based upon the average bid
price of the Common Stock of $.0075 per share on December  31, 2005.  The shares
outstanding  are  reduced  by shares of voting  stock held by each  officer  and
director and by each person who owns 5% or more of the outstanding voting stock.
This determination of affiliate status is not necessarily conclusive.

The number of shares  outstanding of the issuer's Common Stock, $.001 par value,
as of December 31, 2005 was 132,309,075 shares.












                                     Page 2
<PAGE>

                             Index to Annual Report


                                     PART I


ITEM 1 BUSINESS                                                          Page  4

ITEM 1A RISK FACTORS                                                     Page 15

ITEM 2 PROPERTIES                                                        Page 36

ITEM 3 LEGAL PROCEEDINGS - PHOTONICS CORPORATION                         Page 36

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               Page 38


                                     PART II


ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
       STOCKHOLDER MATTERS                                               Page 39

ITEM 6 SELECTED FINANCIAL DATA                                           Page 40

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS                              Page 41

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK       Page 47

ITEM 8 FINANCIAL STATEMENTS WITH SUPPLEMNENTARY DATA                     Page 48

         Report of Independent Registered Public Accounting Firm         Page 49
         Balance Sheets                                                  Page 50
         Statements of Operations                                        Page 52
         Stockholders Deficit                                            Page 53
         Statements of Cash Flows                                        Page 54
         Schedule of Investments                                         Page 56
         Notes to Financial Statements                                   Page 57

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
       ON ACCOUNTING AND FINANCIAL DISCLOSURE                            Page 68

         Item 9A - Controls and Procedures                               Page 68
         Item 8B - Other information                                     Page 68

                                    PART III


Item 10 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT                Page 68

ITEM 11 EXECUTIVE COMPENSATION                                           Page 70

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT   Page 71

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                   Page 71

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES                           Page 72

                                     PART IV

ITEM 15 EXHIBITS AND REPORTS ON FORM 8-K                                 Page 73


                                     Page 3
<PAGE>

INTRODUCTION

This report contains forward-looking statements and the Company's actual results
could  differ  materially  from  those  anticipated  in  these  forward  looking
statements as a result of numerous factors,  including those set forth below and
elsewhere in this report.

                                     PART I

ITEM 1 DESCRIPTION OF BUSINESS

Business History

Photonics Corporation, d/b/a DTC Data Technology (the "Company" or "Photonics"),
a California  Corporation was formed from a merger of Photonics Corporation with
DTC Data  Technology  in March of 1996.  The Company  designed,  developed,  and
marketed   Integrated  Device  Electronics  (IDE)  and  Small  Computer  Systems
Interface  (SCSI) disk  controller  cards and  Input/Output  (I/O)  products for
personal  computers.  However,  as a result of recurring  significant  operating
losses,  in June  1999,  the  board of  directors  voted to shut  down  business
operations  and attempt to sell the Company or its assets.  Since that date, the
Company had been inactive in its original business operations.

Consequently,  during late January and into the first few days of February 2000,
days before the Company planned to file Chapter 11, the Company was contacted by
and reached an initial,  non-binding  agreement  to acquire  RealEstate4Sale.com
(RE4S).  Since  this  acquisition  agreement  is  superior  to the  filing  of a
bankruptcy  proceeding,  the Company  deferred  the  Chapter 11 filing;  and was
actively pursuing the acquisition of RE4S and, following the termination of that
transaction, the acquisition of REpipeline.com, Inc.

The initial,  non-binding agreement to acquire RE4S was terminated as of May 31,
2000. The Agreement,  executed as of June 30, 2000, was executed with a majority
of the same group of principals who represented RE4S but with their newly formed
company REpipeline.com, Inc. (Texas).

On  November  28,  2000,  the  Company  approved  the  merger  and  merged  with
REpipeline.com,  a Texas  Corporation,  an Internet vertical service provider to
the commercial real estate industry,  by issuing  18,127,707 common stock shares
valued  at  $18,128  in  exchange  for all of the  outstanding  common  stock of
REpipeline.com, Inc. ("REP").

The  transaction was accounted for as a reverse merger using the purchase method
of accounting with REP acquiring Photonics for financial reporting purposes. The
purchase  price of Photonics was  allocated  among its net assets based on their
relative  fair  market  values.  Because  Photonics  did not have any  assets or
business operations, no portion of the purchase price was allocated to goodwill.
Instead,  the  excess of the  purchase  price  over the fair value of net assets
acquired has been charged against  operations and reflected in the  accompanying
consolidated financial statements as an acquisition cost.

REpipeline.com,  Inc. was incorporated in the state of Texas on June 8, 2000. On
July 10, 2000, the REpipeline.com,  Inc., a Texas Corporation agreed to purchase
the assets  and  assume the  certain  liabilities  and  shareholder's  equity of
RealEstate4Sale.com.  RealEstate4Sale.com  ("RE4S") was incorporated in Colorado
on August 17,  1999,  and its  purpose  was to provide  commercial  real  estate
listings on the Internet. Subsequent to the acquisition of RealEstate4Sales.com,
the Company reincorporated REpipeline.com,  Inc. into a Delaware corporation and
made it a wholly owned subsidiary.


                                     Page 4
<PAGE>

However,  the  concept  was deemed to be too narrow for the  marketplace,  which
requires a wider variety of services to the  commercial  real estate market over
the Internet,  which are best addressed by the expanded  concept of REP. REP and
Photonics, by virtue of their reverse merger acquisition,  were considered to be
in the  development  stage.  Its website  was  completed  in  December  2000 and
marketing began in January 2001 with no results or revenues to date.

In the fourth quarter of 2001, the Company purchased all the outstanding  shares
of The Sarasota Group, Inc., a Florida  Corporation,  and made it a wholly owned
subsidiary.  The company's  then current  board  resigned  while  simultaneously
electing new officers and directors for the Company.

In the  fourth  quarter  of 2005 the  Company  went  through  another  change in
management.  The new management team is currently  implementing the new business
strategy that is outlined below.

On March 7, 2006 The Company filed a notification  under Form N54a with the U.S.
Securities and Exchange  Commission,  (the "SEC")  indicating its election to be
regulated as a business  development company under the Investment Company Act of
1940 (the "1940 Act"). In connection with this election, the Company has adopted
corporate  resolutions  and  intends  to  operate  as  a  closed-end  management
investment company as such a business development company (a "BDC").

As of March 30, 2006 we had 2  employees.  Various  aspects of due  diligence of
prospective  portfolio  companies  and  monitoring  the  activities of portfolio
companies  will  be  subcontracted  to  consultants.  The  Company  may  require
additional employees in the areas of administration,  sales and marketing,  etc.
in the future and as additional  portfolio companies are added. There is intense
competition  for capable,  experienced  personnel  and there is no assurance the
Company  will be able to obtain  new  qualified  employees  when  required.  The
Company  believes its relations with its  prospective  consultants and employees
are good.

Business Summary

Under the recent election to be governed as a business development company under
the 1940 Act,  the  Company has been  organized  to provide  investors  with the
opportunity  to  participate,  with a  modest  amount  in  venture  capital,  in
investments  that are generally  not available to the public and that  typically
require substantially larger financial commitments. In addition, we will provide
professional  management and administration  that might otherwise be unavailable
to investors if they were to engage  directly in venture capital  investing.  We
have decided to be regulated as a business  development  company  under the 1940
Act,  and will operate as a  non-diversified  company as that term is defined in
Section 5(b)(2) of the 1940 Act. We will, at all times,  conduct our business so
as to retain our status as a BDC.  We may not change the nature of our  business
so as to cease to be, or withdraw our election as, a BDC without the approval of
the holders of a majority of our  outstanding  voting stock as defined under the
1940 Act.

As a business development company, we are required to invest at least 70% of our
total assets in qualifying assets, which,  generally,  are securities of private
companies or securities of public  companies  whose  securities are not eligible
for  purchase on margin  (which  includes  many  companies  with  thinly  traded
securities that are quoted in the pink sheets or the NASD  Electronic  Quotation
Service.) We must also offer to provide  significant  managerial  assistance  to
these portfolio companies. Qualifying assets may also include:


                                     Page 5
<PAGE>

     o    cash,
     o    cash equivalents,
     o    U.S. Government securities, or
     o    high-quality  debt  investments  maturing in one year or less from the
          date of investment.

We may invest a portion of the  remaining 30% of our total assets in debt and/or
equity securities of companies that may be larger or more stabilized than target
portfolio companies.

Nature of a BDC

The 1940 Act defines a BDC as a closed-end  management  investment  company that
provides small  businesses  that qualify as an eligible  portfolio  company with
investment capital and also significant managerial assistance. A BDC is required
under the 1940 Act to invest  at least  70% of its  total  assets in  qualifying
assets consisting of eligible portfolio companies as defined in the 1940 Act and
certain other assets including cash and cash equivalents.

An eligible  portfolio  company generally is a United States company that is not
an investment company and that:

     o    does not have a class  of  securities  registered  on an  exchange  or
          included in the Federal Reserve Board's over-the-counter margin list;
     o    is actively  controlled  by a BDC and has an affiliate of a BDC on its
          board of directors; or
     o    meets such other criteria as may be established by the SEC.

Control  under the 1940 Act is  presumed to exist where a BDC owns more than 25%
of the outstanding voting securities of the eligible  portfolio company.  We may
or may not control our portfolio companies.

An  example  of an  eligible  portfolio  company  is a new start up company or a
privately  owned  company  that has not yet gone public by selling its shares in
the open market and has not applied for having its shares listed on a nationally
recognized  exchange  such as the NYSE the  American  Stock  Exchange,  National
Association of Securities  Dealers' Automated  Quotation System, or the National
Market System. An eligible portfolio company can also be one which is subject to
filing, has filed, or has recently emerged from reorganization  protection under
Chapter 11 of the Bankruptcy Act.

A BDC may invest the remaining 30% of its total assets in non-qualifying assets,
including  companies that are not eligible  portfolio  companies.  The foregoing
percentages will be determined, in the case of financings in which a BDC commits
to provide financing prior to funding the commitment, by the amount of the BDC's
total assets  represented by the value of the maximum amount of securities to be
issued by the  borrower or lessee to the BDC pursuant to such  commitment.  As a
BDC, we must invest at least 70% of our total  assets in  qualifying  assets but
may invest more in such qualifying assets.

Primary Strategy

We will have significant  relative  flexibility in selecting and structuring our
investments.  We will not be subject to many of the regulatory  limitations that
govern traditional lending institutions such as banks. We will seek to structure
our  investments  so as to take  into  account  the  uncertain  and  potentially
variable financial  performance of our portfolio  companies.  This should enable
our  portfolio  companies  to retain  access to  committed  capital at different


                                     Page 6
<PAGE>

stages in their  development and eliminate some of the  uncertainty  surrounding
their  capital  allocation  decisions.  We will  calculate  rates of  return  on
invested capital based on a combination of up-front commitment fees, current and
deferred  interest rates and residual values,  which may take the form of common
stock,  warrants,  equity  appreciation  rights or future contract payments.  We
believe that this flexible  approach to structuring  investments will facilitate
positive,  long-term relationships with our portfolio companies and enable us to
become a  preferred  source of capital to them.  We also  believe  our  approach
should enable debt financing to develop into a viable alternative capital source
for  funding  the  growth of target  companies  that wish to avoid the  dilutive
effects of equity financings for existing equity holders.

Longer  Investment  Horizon - We will not be subject to periodic  capital return
requirements. These requirements, which are standard for most private equity and
venture  capital funds,  typically  require that these funds return to investors
the initial  capital  investment  after a  pre-agreed  time,  together  with any
capital  gains on such capital  investment.  These  provisions  often force such
funds to seek the return of their  investments  in portfolio  companies  through
mergers,  public equity  offerings or other  liquidity  events more quickly than
they  otherwise  might,  which can result in a lower overall return to investors
and adversely affect the ultimate viability of the affected portfolio companies.
Because we may invest in the same  portfolio  companies as these  funds,  we are
subject to these risks if these funds  demand a return on their  investments  in
the portfolio  companies.  We believe that our flexibility to take a longer-term
view should  help us to maximize  returns on our  invested  capital  while still
meeting the needs of our portfolio companies.

Established Deal Sourcing Network - We believe that,  through our management and
directors,  we have solid contacts and sources from which to generate investment
opportunities. These contacts and sources include:

     o    public and private companies,
     o    investment bankers,
     o    attorneys,
     o    accountants,
     o    consultants, and
     o    commercial bankers.

However,  we  cannot  assure  you  that  such  relationships  will  lead  to the
origination of debt or other investments.

Investment Criteria

As a matter of policy,  we will not purchase or sell real estate or interests in
real estate or real estate investment trusts except that we may:

     o    purchase  and  sell  real  estate  or  interests  in  real  estate  in
          connection  with  the  orderly  liquidation  of  investments,   or  in
          connection with foreclosure on collateral;
     o    own the  securities  of companies  that are in the business of buying,
          selling or developing real estate; or
     o    finance the purchase of real estate by our portfolio companies.

We will limit our  investments in more  traditional  securities  (stock and debt
instruments) and will not, as a matter of policy:


                                     Page 7
<PAGE>

     o    sell  securities  short  except  with  regard  to  managing  the risks
          associated  with  publicly-traded  securities  issued by our portfolio
          companies;
     o    Purchase  securities  on  margin  (except  to the  extent  that we may
          purchase securities with borrowed money); or
     o    engage in the purchase or sale of commodities or commodity  contracts,
          including  futures  contracts  except  where  necessary in working out
          distressed loan; or
     o    investment situations or in hedging the risks associated with interest
          rate  fluctuations,  and,  in such  cases,  only  after all  necessary
          registrations  or  exemptions  from  registration  with the  Commodity
          Futures Trading Commission have been obtained.

Prospective  Portfolio  Company  Characteristics  - We have  identified  several
criteria  that we  believe  will  prove  important  in  seeking  our  investment
objective with respect to target companies.  These criteria will provide general
guidelines for our investment  decisions;  however,  we caution readers that not
all of these criteria will be met by each prospective portfolio company in which
we choose to invest.

Experienced  Management - We will generally require that our portfolio companies
have an  experienced  president  or  management  team.  We will also require the
portfolio  companies to have in place proper  incentives to induce management to
succeed and to act in concert with our interests as investors,  including having
significant  equity  interests.  We intend to  provide  assistance  in this area
either  supervising   management  or  providing  management  for  our  portfolio
companies.

Products or Services - We will seek  companies  that are involved in products or
services  that  do  not  require  significant  additional  capital  or  research
expenditures. In general, we will seek target companies that make innovative use
of proven technologies or methods.

Proprietary  Advantage - We expect to favor companies that can demonstrate  some
kind of proprietary  sustainable  advantage  with respect to their  competition.
Proprietary advantages include, but are not limited to:

     o    patents or trade secrets with respect to owning or  manufacturing  its
          products, and
     o    a  demonstrable   and   sustainable   marketing   advantage  over  its
          competition

Marketing  strategies  impose unusual  burdens on management to be  continuously
ahead of its competition, either through some kind of technological advantage or
by being continuously more creative than its competition.

Profitable or Nearly Profitable  Operations Based on Cash Flow from Operations -
We will focus on target companies that are profitable or nearly profitable on an
operating cash flow basis.  Typically, we would not expect to invest in start-up
companies unless there is a clear exit strategy in place.

Potential  for Future  Growth - We will  generally  require  that a  prospective
target  company,  in addition to  generating  sufficient  cash flow to cover its
operating  costs and service its debt,  demonstrate  an ability to increase  its
revenues and operating  cash flow over time.  The  anticipated  growth rate of a
prospective target company will be a key factor in determining the value that we
ascribe  to any  warrants  or other  equity  securities  that we may  acquire in
connection with an investment in debt securities.


                                     Page 8
<PAGE>

Exit Strategy - Prior to making an investment  in a portfolio  company,  we will
analyze the  potential  for that company to increase the liquidity of its common
equity through a future event that would enable us to realize  appreciation,  if
any, in the value of our equity interest. Liquidity events may include:

     o    an initial public offering,
     o    a private sale of our equity interest to a third party,
     o    a merger or an acquisition of the portfolio company, or
     o    a purchase of our equity  position by the portfolio  company or one of
          its stockholders.

We may  acquire  warrants  to  purchase  equity  securities  and/or  convertible
preferred stock of the eligible portfolio companies in connection with providing
financing.  The terms of the warrants,  including the expiration date,  exercise
price and terms of the equity  security for which the warrant may be  exercised,
will be negotiated  individually with each eligible portfolio company,  and will
likely be affected by the price and terms of  securities  issued by the eligible
portfolio company to other venture  capitalists and other holders. We anticipate
that most  warrants  will be for a term of five to ten  years,  and will have an
exercise price based upon the price at which the eligible portfolio company most
recently  issued  equity  securities  or, if a new equity  offering is imminent,
equity securities. The equity securities for which the warrant will be exercised
generally  will be common  stock of which  there may be one or more  classes  or
convertible  preferred  stock.  Substantially  all the warrants  and  underlying
equity  securities will be restricted  securities under the 1933 Act at the time
of the issuance.  We will generally  negotiate for registration  rights with the
issuer that may provide:

     o    "piggyback"  registration  rights,  which will permit us under certain
          circumstances, to include some or all of the securities owned by us in
          a registration statement filed by the eligible portfolio company, or
     o    in  circumstances,  "demand"  registration  rights permitting us under
          certain  circumstances,  to require the eligible  portfolio company to
          register  the  securities  under  the 1933 Act,  in some  cases at our
          expense.  We will generally  negotiate net issuance  provisions in the
          warrants,  which will allow us to receive upon exercise of the warrant
          without  payment of any cash a net amount of shares  determined by the
          increase in the value of the issuer's  stock above the exercise  price
          stated in the warrant.

Liquidation  Value of  Assets -  Although  we do not  intend  to  operate  as an
asset-based  lender,  the prospective  liquidation  value of the assets, if any,
collateralizing  any debt securities that we hold will be an important factor in
our credit analysis. We will emphasize both tangible assets, such as:

     o    accounts receivable,
     o    inventory, and
     o    equipment,

and intangible assets, such as:

     o    intellectual property,
     o    customer lists,
     o    networks, and
     o    databases.

Investment Process


                                     Page 9
<PAGE>

Due  Diligence  -  If a  target  company  generally  meets  the  characteristics
described above, we will perform initial due diligence, including:

     o    company and technology assessments,
     o    existing management team,
     o    market analysis,
     o    competitive analysis,
     o    evaluation of management, risk analysis and transaction size,
     o    pricing, and
     o    structure analysis.

Much of this  work will be done by  management  and  professionals  who are well
known by management.  The criteria  delineated above provide general  parameters
for our  investment  decisions.  We intend to pursue an  investment  strategy by
further  imposing  such  criteria and reviews that best insures the value of our
investments.  As unique circumstances may arise or be uncovered, not all of such
criteria will be followed in each instance but the process  provides a guideline
by  which  investments  can be  prudently  made  and  managed.  Upon  successful
completion of the  preliminary  evaluation,  we will decide whether to deliver a
non-binding  letter of intent  and move  forward  towards  the  completion  of a
transaction.

In our review of the management team, we look at the following:

     o    Interviews with management and significant shareholders, including any
          financial or strategic sponsor; o Review of financing history;
     o    Review of management's track record with respect to:
     o    product development and marketing,
     o    mergers and acquisitions,
     o    alliances,
     o    collaborations,
     o    research and development outsourcing and other strategic activities;
     o    Assessment of competition; and
     o    Review of exit strategies.

In our review of the financial conditions, we look at the following:

     o    Evaluation of future financing needs and plans;
     o    Detailed analysis of financial performance;
     o    Development of pro forma financial projections; and
     o    Review of assets and liabilities, including contingent liabilities, if
          any, and legal and regulatory risks.

In our review of the products and services of the portfolio company,  we look at
the following:

     o    Evaluation of intellectual property position;
     o    Review of existing customer or similar agreements and arrangements;
     o    Analysis of core technology;
     o    Assessment of collaborations;
     o    Review of sales and marketing procedures; and
     o    Assessment of market and growth potential.

Upon  completion  of these  analyses,  we will conduct  on-site  visits with the
target company's management team. Also, in cases in which a target company is at


                                    Page 10
<PAGE>

a mature  stage  of  development  and if  other  matters  that  warrant  such an
evaluation, we will obtain an independent appraisal of the target company.

Ongoing Relationships with Portfolio Companies

Monitoring - We will  continuously  monitor our portfolio  companies in order to
determine  whether they are meeting our financing  criteria and their respective
business  plans.  We may decline to make  additional  investments  in  portfolio
companies that do not continue to meet our financing  criteria.  However, we may
choose to make additional  investments in portfolio companies that do not do so,
but we believe that we will nevertheless perform well in the future.

We will monitor the  financial  trends of each  portfolio  company to assess the
appropriate  course of action for each company and to evaluate overall portfolio
quality. Our management team and consulting professionals, who are well known by
our management  team,  will closely  monitor the status and  performance of each
individual company on at least a quarterly and, in some cases, a monthly basis.

We will use several  methods of evaluating and monitoring  the  performance  and
fair value of our debt and equity  positions,  including  but not limited to the
following:

     o    Assessment  of  business   development   success,   including  product
          development,  financings,  profitability  and the portfolio  company's
          overall adherence to its business plan;
     o    Periodic and regular  contact with  portfolio  company  management  to
          discuss financial position, requirements and accomplishments;
     o    Periodic and regular formal update  interviews with portfolio  company
          management and, if appropriate, the financial or strategic sponsor;
     o    Attendance at and participation in board meetings;
     o    Review of monthly and  quarterly  financial  statements  and financial
          projections for portfolio companies.

Managerial Assistance - As a business development company, we will offer, and in
many cases may provide, significant managerial assistance to our portfolio
companies. This assistance will typically involve:

     o    monitoring the operations of our portfolio companies,
     o    participating in their board and management meetings,
     o    consulting with and advising their officers, and
     o    providing other organizational and financial guidance.


Diversification

As a BDC, we must invest at least 70% of our total assets in  qualifying  assets
consisting  of  investments  in eligible  portfolio  companies and certain other
assets  including  cash and cash  equivalents.  In  order to  receive  favorable
pass-through tax treatment on its distributions to our  shareholders,  we intend
to  diversify  our pool of  investments  in such a manner so as to  qualify as a
diversified closed end management  investment company.  However,  because of the
limited  size of the  funding  which is  likely to be  available  to us, we will
likely be classified as a  non-diversified  closed end investment  company under
the 1940 Act. Until we qualify as a registered  investment  company, we will not
be  subject to the  diversification  requirements  applicable  to RICs under the
Internal Revenue Code. Therefore, we will not receive favorable pass through tax
treatment on distributions to our  shareholders.  In the future, we will seek to


                                    Page 11
<PAGE>

increase the  diversification of our portfolio so as to make it possible to meet
the RIC diversification  requirements, as described below. We cannot assure you,
however, that we will ever be able to meet those requirements.

To qualify as a RIC, we must meet the issuer diversification standards under the
Internal  Revenue  Code that require  that,  at the close of each quarter of our
taxable year,

     o    not more than 25% of the market  value of our total assets is invested
          in the securities of a single issuer, and
     o    at least 50% of the market value of our total assets is represented by
          cash, cash items, government securities, securities of other RICs, and
          other securities.

Each investment in these other securities is limited so that not more than 5% of
the market value of our total assets is invested in the  securities  of a single
issuer and we do not own more than 10% of the outstanding voting securities of a
single  issuer.  For  purposes  of the  diversification  requirements  under the
Internal Revenue Code, the percentage of our total assets invested in securities
of a portfolio  company will be deemed to refer,  in the case of  financings  in
which we commit to provide  financing  prior to funding the  commitment,  to the
amount of our total assets  represented by the value of the securities issued by
the eligible  portfolio company to us at the time each portion of the commitment
is funded.

Investment Amounts

The  amount  of  funds  committed  to a  portfolio  company  and  the  ownership
percentage  received  will  vary  depending  on the  maturity  of the  portfolio
company,  the quality and  completeness  of the portfolio  company's  management
team,  the perceived  business  opportunity,  the capital  required  compared to
existing capital,  and the potential return.  Although  investment  amounts will
vary considerably,  we expect that the average  investment,  including follow-on
investments, will be between $25,000 and $1,000,000.

Competition

Our primary  competitors to provide  financing to target  companies will include
private  equity and venture  capital funds,  other equity and  non-equity  based
investment funds and investment banks and other sources of financing,  including
traditional  financial services companies such as commercial banks and specialty
finance companies.  Many of these entities have substantially  greater financial
and  managerial  resources  than we will have.  We believe that our  competitive
advantage  with  regard to quality  target  companies  relates to our ability to
negotiate  flexible  terms and to complete our review process on a timely basis.
We cannot assure you that we will be successful in implementing our strategies.

Current Portfolio Companies

On December 16, 2005,  the Company  entered into a stock  purchase  agreement to
acquire all issued and outstanding shares of the capital stock of ACL Consulting
Corporation (ACL), a Texas corporation majority owned by an officer and director
of the Company providing business  consulting  services to companies that desire
to go public.

The  purchase  price of the shares was  $1,593,000.  The  consideration  for the
acquisition  was  comprised  of three  components:  (1) $735,000 in cash paid at
closing, (2) $458,000 secured promissory note delivered at closing (Note 5), and


                                    Page 12
<PAGE>

(3) 400,000  shares of Series A Redeemable  Convertible  Preferred  Stock of the
Company with a value at issuance of $400,000 (Note 4).

The stock purchase agreement contains a right to rescission,  whereby the seller
shall have the right to rescind the agreement and maintain 100% ownership of ACL
Consulting Corporation in the event the Company fails to do the following:

(1) Fails to make any  required  payments  pursuant  to the terms of the Secured
Promissory  Note  (Note 5); or (2)  Fails to  become  registered  under the 1940
Investment Company Act as a small business  development company; or (3) Fails to
make any required securities filings for a period of 15 months, beginning on the
closing date of December 16, 2005.

At December 31, 2005,  the  Company's  carrying  value of its  investment in ACL
consisted of its original cost of  $1,593,000  less cash advances to the Company
by ACL of $1,277,271.

Photonics currently owns 100% of ACL Consulting. The business and purpose of ACL
Consulting  ("ACL") is to  identify  companies  which are  capable  of  becoming
publicly traded or are already publicly traded in various industry  segments and
which  are at a stage of  development  that  would  benefit  from the  company's
support,  market knowledge and financial support. ACL generally seeks to acquire
a nominal stake in portfolio  companies (usually under 10%) to enable it to have
to  realize a  significant  enough  return to  compensate  the  company  for its
investment of management  time and effort,  as well as capital.  These portfolio
companies will need to be able to operate independently as an isolated business.

Established  companies  traditionally  seek  financing  for growth from  several
primary  sources:   independent  private  venture  capital  funds,   traditional
financial  institutions  such as  banks  and  investment  banks,  and  corporate
strategic  investors.  Each of these sources has disadvantages for our potential
portfolio  companies.  Venture  capital funds  generally are  established  for a
limited term and their primary goal is to maximize their financial return within
a short  time  frame.  A venture  capital  fund  often  seeks to  liquidate  its
investment in a company by encouraging  either an early initial public  offering
or a sale. In addition, traditional venture capital funds generally have limited
resources  available to provide managerial and operational support to a company.
Financial   institutions,   such  as  banks  and  investment  banks,  require  a
substantial  amount of  collateral  and other  stringent  requirements  that the
portfolio companies may lack.

ACL's corporate staff believes that their relationship with portfolio  companies
offers the benefits of both the venture capital model and the strategic investor
model  without  the  related  drawbacks.  The  company  intends to have both the
capital and managerial resources to provide financing and strategic, managerial,
and operational support as needed by potential portfolio companies. In addition,
ACL encourages its potential portfolio companies to achieve the superior returns
on investment generally provided by public offerings, but only if and when it is
appropriate for the development of the business of that company.

ACL's corporate  staff will, if necessary,  provide  hands-on  assistance to the
managers  of its  portfolio  companies  in the areas of  management,  financial,
marketing, tax, risk management,  human resources, legal and technical services.
Again, if necessary, the company will assist portfolio companies by providing or
locating and  structuring  financing,  identifying  and  implementing  strategic
initiatives,   providing  marketing   assistance,   identifying  and  recruiting
executives  and  directors,  assisting in the  development  of equity  incentive
arrangements  for  executives  and  employees,   and  providing   assistance  in


                                    Page 13
<PAGE>

structuring,  negotiating,  documenting, financing, implementing and integrating
mergers and acquisitions.

ACL's corporate staff believes that the entrepreneurial energy and creativity of
the managers of its  portfolio  companies  are an  essential  component of their
success.  ACL's business strategy of bringing portfolio companies public, rather
than folding them into the parent  company,  is designed to maintain a continued
entrepreneurial  environment.  The  entrepreneurs and their teams retain and are
granted equity  ownership and incentives in their own companies in order to keep
them focused on creating value for their stockholders as well as ACL.

Valuation Methodology

As an investment  company under the  Investment  Company Act of 1940, all of the
Company's  investments  must  be  carried  at  market  value  or fair  value  as
determined by Management for investments which do not have readily  determinable
market  values.  Prior to this  conversion,  only  marketable  debt  and  equity
securities  and certain  derivative  securities  were  required to be carried at
market value.

Beginning  December  16,  2005,  portfolio  assets for which  market  prices are
available  are  valued  at  those  prices.  Securities  that are  traded  in the
over-the-counter  market or on a stock exchange  generally will be valued at the
prevailing  bid price on the valuation  date.  However,  the  Company's  current
investments  were  acquired in  privately  negotiated  transactions  and have no
readily  determinable market values.  These securities are carried at fair value
as determined by Management  and outside  professionals  as necessary  under the
Company's  valuation  policy.  Currently,  the  valuation  policy  provides  for
Management's review of the management team, financial  conditions,  and products
and  services of the  portfolio  company.  In  situations  that  warrant such an
evaluation, an independent business valuation may be obtained.

Value,  as defined in Section  2(a)(41) of 1940 Act, is (i) the market price for
those securities for which a market quotation is readily  available and (ii) for
all other  securities  and assets,  fair value is as determined in good faith by
Management.  There is no single  standard  for  determining  fair  value in good
faith. As a result,  determining fair value requires that judgment be applied to
the specific facts and circumstances of each portfolio  investment.  The Company
must  determine  the fair value of each  individual  investment  on a  quarterly
basis.  The Company will record  unrealized  depreciation on investments when it
believes that an investment has become impaired,  including where realization of
an equity security is doubtful.  Conversely,  the Company will record unrealized
appreciation if the Company believes that the underlying  portfolio  company has
appreciated in value and,  therefore,  its  investment  has also  appreciated in
value, where appropriate.

As an investment  company,  the Company invests primarily in illiquid securities
including equity securities of private  companies.  The structure of each equity
security  is  specifically  negotiated  to enable the  Company  to  protect  its
investment and maximize its returns.  The Company generally  includes many terms
governing ownership parameters,  dilution parameters,  liquidation  preferences,
voting rights, and put or call rights.  The Company's  investments are generally
subject to some restrictions on resale and generally have no established trading
market. Because of the type of investments that the Company makes and the nature
of its business, the Company's valuation process requires an analysis of various
factors. The Company's fair value methodology includes the examination of, among
other things, the underlying  investment  performance,  financial  condition and
market changing events that impact valuation.


                                    Page 14
<PAGE>

ITEM 1A RISK FACTORS

In the normal course of business in an effort to keep our  shareholders  and the
public informed about our operations and portfolio of  investments,  we may from
time-to-time issue certain statements, either in writing or orally, that contain
or may contain forward-looking  information.  Generally, these statements relate
to our  business  plans or  strategies  or  portfolio  companies,  projected  or
anticipated  benefits or consequences of such plans or strategies,  projected or
anticipated  benefits of new or follow-on  investments  made by or to be made by
us, or  projections  involving  anticipated  purchases or sales of securities or
other  aspects of our  operating  results.  Forward-looking  statements  are not
guarantees of future performance and are subject to risks and uncertainties that
could cause  actual  results to differ  materially.  As noted  elsewhere in this
report,  our operations and portfolio of investments  are subject to a number of
uncertainties,  risks,  and  other  influences,  many of which are  outside  our
control,  and any one of which,  or a  combination  of which,  could  materially
affect the results of our operations, or our NAV, the market price of our common
stock, and whether any forward-looking statements made by us ultimately prove to
be accurate.

Investing in Photonics  involves a number of  significant  risks relating to our
business and investment  objective.  As a result, there can be no assurance that
we will achieve our  investment  objective.  In  addition,  the  following  risk
factors are applicable to an investment in our common stock.

GENERAL RISK FACTORS

Investments in the Company by new shareholders will be diluted immediately.

Due, in part, to increases in our share price, some of our present  shareholders
have acquired an interest in our common stock at a total cost substantially less
than the total  cost that newer  investors  will  likely  pay for their  shares.
Therefore,  the newer  investors  will bear a greater  proportion of the risk of
loss  (measured  by the cost of shares).  As of December  31,  2005,  there were
200,000,000  shares of common stock  authorized  and  132,309,075  common shares
outstanding.

We may sell additional equity in the future that may further dilute the value of
your investment.

Reductions  in the  price of our stock  resulting  from the  performance  of our
portfolio  or other  market  conditions  might result in stock being sold to new
investors,  including management,  at prices below the price paid by you. Senior
management  may be  granted  the right,  and  others  may have the right,  under
certain  circumstances,  to acquire  additional  shares of our common stock at a
price equal to the market price as it exists at a point in the future. If such a
grant of a right  occurred  at a time when the  price of the  stock  has  fallen
relative  to the  current  market  value and falls  below the price paid by you,
management  might be given the right to  purchase  stock at a price  below  your
cost. In either of these cases,  the value of your  investment  would be further
diluted.

Limitation of liability and indemnification of management.

While limitations of liability and  indemnification  are themselves  limited, we
have instituted provisions in our bylaws indemnifying,  to the extent permitted,
against and not making management liable for, any loss or liability  incurred in
connection  with our affairs,  so long as such loss or liability arose from acts


                                    Page 15
<PAGE>

performed in good faith and not involving any fraud, gross negligence or willful
misconduct.   Therefore,  to  the  extent  that  these  provisions  provide  any
protection to management,  that  protection may limit the right of a shareholder
to collect damages from members of management.  Management is accountable to the
shareholder as a fiduciary and, consequently, members of management are required
to exercise good faith and integrity in handling our affairs.

Our business may become subject to extensive regulation at the federal and state
levels.  The value of securities we own may be adversely  impacted by subsequent
regulatory changes.

Our operations are and will be affected by current and future legislation and by
the  policies  established  from  time to  time by  various  federal  and  state
regulatory authorities. It is not possible to predict what changes, if any, will
be made to existing federal and state  legislation and regulations or the effect
that such changes may have on our future  business and earnings  prospects.  Our
current investment strategy includes purchase of unregistered securities in both
private companies as well as private placements offered by public companies.  We
are able to purchase  securities  pursuant  to  exemptions  to the  registration
requirements of United States Federal  securities laws.  Changes in such laws or
their   interpretation  could  adversely  impact  our  ability  to  resell  such
securities which would have a negative effect on the value of such securities as
well  as  impact  our  overall  investment  strategy  and the  liquidity  of our
investments.  In such  an  event,  we may  need to  reformulate  our  investment
strategy or we may choose to liquidate.

We cannot guarantee paying dividends to our stockholders.

We are allowed by our articles of incorporation  and/or by-laws to pay dividends
to our stockholders.  However, there can be no guarantee we will have sufficient
revenues to pay dividends during any period. We intend to make  distributions on
a  quarterly  basis to our  stockholders  out of assets  legally  available  for
distribution.  We cannot assure you that we will achieve  investment  results or
maintain a tax status  that will allow or require  any  specified  level of cash
distributions or year-to-year increases in cash distributions.  In addition, due
to the asset coverage test applicable to us as a business  development  company,
we may be limited in our  ability to make  distributions.  Investors  in need of
liquidity  through the payment of  dividends  should  refrain  from common stock
which does not have a dividend requirement.

Investing in our shares may involve a high degree of risk.

The investments we make in accordance  with our investment  objective may result
in a higher amount of risk than alternative investment options and volatility or
loss of principal. Our investments in portfolio companies may be speculative and
aggressive,  and therefore,  an investment in our shares may not be suitable for
someone with low risk tolerance.

The market price of our common stock may fluctuate significantly.

The market price and  liquidity of the market for shares of our common stock may
be  significantly  affected  by numerous  factors,  some of which are beyond our
control  and may not be directly  related to our  operating  performance.  These
factors, may adversely affect our ability to raise capital through future equity
financings. These factors include:


                                    Page 16
<PAGE>

     o    significant  volatility  in the  market  price and  trading  volume of
          securities   of  business   development   companies,   which  are  not
          necessarily related to the operating performance of these companies;

     o    changes in regulatory  policies or tax guidelines,  particularly  with
          respect to RICs or business development companies;

     o    our common  stock is unlikely  to be followed by any market  analysts,
          and there may be few  institutions  acting  as market  makers  for the
          common stock which can adversely affect its price;

     o    loss of or inability to qualify for RIC status or BDC status;

     o    changes in earnings or variations in operating results;

     o    changes in the value of our portfolio of investments;

     o    any  shortfall in revenue or net income or any increase in losses from
          levels expected by investors or securities analysts;

     o    departure of one or more of our key personnel;

     o    operating performance of companies comparable to us;

     o    potential legal and regulatory matters;

     o    changes in prevailing interest rates;

     o    general economic trends and other external factors; and

     o    loss of a major funding source.


Sales of  substantial  amounts of our common stock in the public market may have
an adverse effect on the market price of our common stock.

We currently have  132,309,075  shares of common stock  outstanding.  We plan to
raise  funds  in the  future  through  sales of our  common  stock  pursuant  to
Regulation  E, which  provides in part for  issuance of freely  trading  shares.
Sales of  substantial  amounts of our common stock or the  availability  of such
shares  for sale could  adversely  affect the  prevailing  market  price for our
common stock. If this occurs and continues, it could impair our ability to raise
additional  capital through the sale of equity securities should we desire to do
so.

Our  Board  of  Directors  also has  authority,  without  action  or vote of the
shareholders,  to issue all or part of our authorized but unissued  shares.  Any
such  issuance will dilute the  percentage  ownership of  shareholders  and may,
subject to the regulations pertaining to the minimum prices for which shares may
be sold,  further dilute the book value of the common stock. These issuances may
also serve to enhance existing  management's  ability to maintain control of the
Company.

We have the right,  but do not intend to issue senior  securities in the future,
including  debt.  If we were to reverse that  decision and offer for sale and/or
issue senior securities,  you will be exposed to additional risks, including the
typical risks associated with leverage.


                                    Page 17
<PAGE>

You  will  be  exposed  to  increased  risk of  loss  if we  incur  debt to make
investments.  If we do incur debt,  a decrease  in the value of our  investments
would have a greater negative impact on the value of our common stock than if we
did not use debt.

     o    Our ability to pay dividends would be restricted if our asset coverage
          ratio  were not at least 200% and any  amounts  that we use to service
          our  indebtedness  would not be available  for dividends to our common
          stockholders.

     o    It is likely that any debt we incur will be  governed by an  indenture
          or other  instrument  containing  covenants  restricting our operating
          flexibility.

     o    We and you as shareholders will bear the cost of issuing and servicing
          our senior securities.

     o    Any convertible or exchangeable securities that we issue in the future
          may have rights,  preferences and privileges more favorable than those
          of our common stock.


Our investments may require us to raise additional capital on different terms.

We will require additional  capital in the future. For additional  requirements,
we may raise capital by issuing equity or convertible debt securities,  and when
we do, the percentage ownership of our existing stockholders will be diluted. In
addition,  any new  securities  we issue  could  have  rights,  preferences  and
privileges senior to our existing equity (although we do not intend to sell debt
or preferred equity interests).

Our ability to raise capital as a BDC is limited by the requirement  that we not
sell shares below the NAV/S without approval of a majority of our  shareholders.
While we do not  anticipate  that the NAV/S  calculation  will ever  result in a
negative number or a nominally  positive  number,  the Company would be severely
limited in its ability to sell  shares if such a negative  number or a nominally
positive number were to be the result of a NAV/S calculation.

Increases in market  interest  rates may both reduce the value of our  portfolio
investments and increase our cost of capital.

We expect that we may offer loans to our  portfolio  companies  with interest at
fixed rates and the value of these investments  could be negatively  affected by
increases in market interest  rates. In addition,  an increase in interest rates
would  make it more  expensive  to use debt to  finance  our  investments.  As a
result,  a significant  increase in market  interest rates could both reduce the
value of our portfolio investments and increase our cost of capital, which would
reduce our net investment income.

The lack of liquidity in our investments may adversely affect our business.

We will generally make investments in private  companies.  Substantially  all of
these  securities  will be subject to legal and other  restrictions on resale or
will otherwise be less liquid than publicly traded  securities.  The illiquidity
of our investments may make it difficult for us to sell such  investments if the
need arises.  In addition,  if we are required to liquidate  all or a portion of
our portfolio  quickly,  due to changes in capital  needs or  otherwise,  we may


                                    Page 18
<PAGE>

realize  significantly less than the value at which we have previously  recorded
our investments.  In addition,  we may face other restrictions on our ability to
liquidate  an  investment  in a  portfolio  company to the extent that we or our
investment adviser has material non-public  information regarding such portfolio
company.

 We may experience fluctuations in our quarterly and annual results.

We could experience  fluctuations in our quarterly and annual operating  results
due to a number of factors,  including the interest or dividend rates payable on
the debt or equity  securities we acquire,  performance  and/or  default rate on
securities we acquire,  the level of our expenses,  variations in and the timing
of the  recognition  of realized and unrealized  gains or losses,  the degree to
which we encounter competition in our markets, changes in the beverage industry,
and general economic conditions.  As a result of these factors,  results for any
period should not be relied upon as being  indicative of  performance  in future
periods.

We may not realize gains or income from our investments.

We seek to generate both current income and capital  appreciation.  However, the
securities,  in which we invest, may not appreciate and, in fact, may decline in
value,  and the issuers of debt securities,  in which we invest,  may default on
interest and/or principal payments.  Accordingly,  we may not be able to realize
gains  from  our  investments,  and  any  gains  that we do  realize  may not be
sufficient to offset any losses we experience.

Your influence in matters  requiring  shareholder  action will be subject to the
probability that most shareholders will follow management's direction.

There are no major shareholders with a controlling interest owning more than ten
percent and no consortium of  shareholders  has been  identified with a block of
control or who would likely exercise voting control over all matters that may be
submitted for approval by our  shareholders.  Without such a controlling  block,
management positions will be the most likely to be presented to shareholders and
more  likely  to  influence   shareholder   decisions   (assuming  a  fact  that
shareholders will likely "vote with" management). Therefore, while the number of
shares  controlled by the officers and directors is less that a majority,  their
position of control is material and significant.

Pursuant  to our  articles  of  incorporation,  our Board of  Directors  has the
authority  to issue  shares of stock  without any further  vote or action by the
stockholders.  The issuance of stock under certain  circumstances could have the
effect of delaying or preventing a change in control of the Company or may deter
takeover attempts.

Our articles of  incorporation  contain  provisions  that may have the effect of
discouraging,  delaying  or  making  more  difficult  a change  in  control  and
preventing the removal of incumbent directors. The existence of these provisions
may reduce any premiums over market price that a potential  acquirer would offer
to shareholders for their shares of our common stock and may discourage attempts
to gain control without the consent of the Board of Directors. While shares must
be sold for cash or other  securities,  the Board of  Directors  might choose to
sell shares to a party with views  consistent  with those of management  further
limiting the likelihood of a change in control.


GENERAL RISKS ASSOCIATED WITH BUSINESS DEVELOPMENT COMPANIES


                                    Page 19
<PAGE>

BDCs generally require  substantial amounts of time to realize the benefits from
investments.

Venture  capital  investments  typically  take from four to eight years from the
date of initial investment to reach a state of maturity at which liquidation can
be considered practical.  We have not completed funding of our current portfolio
company and we anticipate that there may be an additional period of time ranging
from three to six months before we have obtained funding and completed investing
that  funding  in  our  portfolio  companies  for  our  first  round  of  equity
investments.  In light of the  foregoing,  it is unlikely  that any  significant
distributions of the proceeds from the liquidation of equity investments will be
made for several years after inception, if at all.

Our present senior  management team has limited  experience  managing a business
development company under the Investment Company Act of 1940.

The  1940  Act  imposes  numerous  constraints  on the  operations  of  business
development companies. For example,  business development companies are required
to  invest  at least  70% of their  total  assets  primarily  in  securities  of
privately held or thinly traded U.S. public  companies,  cash, cash equivalents,
U.S.  government  securities and other high quality debt investments that mature
in one year or less.  The lack of  experience of our senior  management  team in
managing a portfolio of assets under such  constraints  may hinder their ability
to take  advantage  of  attractive  investment  opportunities  and, as a result,
achieve our investment  objective.  Within the BDC format, the information about
deals and deal flow generated by our senior  management in connection with their
investment and portfolio management activities will have a significant impact on
our  future  success  as a  BDC.  The  senior  management  team  will  evaluate,
structure,  negotiate  terms and close  investments on those terms,  monitor and
service our  investments  and their  abilities  to perform  these  functions  as
members of a BDC will also have a significant  impact on our future success as a
BDC.

We  will be  wholly  dependent  for  the  selection,  structuring,  closing  and
monitoring  of  all  of  our  investments  on the  diligence  and  skill  of our
management,  acting under the  supervision  of our Board of  Directors.  None of
these individuals has substantial  experience,  within or under a BDC investment
and management format, in acquiring and investing in growth stage companies, the
negotiation  of the  terms  of  such  investments  and  the  monitoring  of such
investments after they are made. In addition, we will engage outside consultants
and  professionals  known to management to assist in evaluating  and  monitoring
portfolio companies and maintaining regulatory compliance.

While we believe that our  management  possesses  certain  fundamental  business
skills that will increase our  likelihood to succeed,  our  management  team has
limited experience  operating a BDC and must be considered as inexperienced when
it comes to the both the day to day operations of an investment  company and the
management of investments.  We intend to rely on the general skills and business
acumen  of our  management  team as well as  engaging  other  professionals  and
consultants  from time to time to insure that it gains the expertise to manage a
BDC.

We may change our investment policies without further shareholder approval.

Although we are limited by the 1940 Act with  respect to the  percentage  of our
assets  that must be  invested  in  qualified  portfolio  companies,  we are not
limited with respect to the minimum  standard that any  investment  company must
meet, nor the industries in which those  investment  companies must operate.  We
may make  investments  without  shareholder  approval and such  investments  may


                                    Page 20
<PAGE>

deviate significantly from our historic operations. Any change in our investment
policy or  selection  of  investments  could  adversely  affect our stock price,
liquidity, and the ability of our shareholders to sell their stock.

We may allocate the net proceeds from stock sales in ways with which you may not
agree.

We will have significant  flexibility in investing the net proceeds of our stock
sales.  We may use the net  proceeds in ways with which you may not agree or for
investments other than those contemplated at the time we sell the stock,  unless
such  change in the use of  proceeds  is subject to  stockholders'  approval  or
prohibited by law.

Our investments may not generate sufficient income to cover our operations.

While we intend to make  investments  into those  qualified  companies that will
provide the greatest  overall return on our investment,  we are required to make
investments  into those  companies  which,  whether due to lack of experience or
financial  instability  (including  insolvency),  may present the greatest risk.
This is in conformity with the Small Business  Investment  Incentive Act of 1980
which amended the 1940 Act and permitted the creation of BDC's. However, certain
of those  investments  may fail, in which case we will not receive any return on
our investment.  In addition, our investments may not generate income, either in
the immediate  future,  or at all. As a result,  we may have to sell  additional
stock,  or borrow  money,  to cover our operating  expenses.  The effect of such
actions  could cause our stock price to decline or, if we are not  successful in
raising additional  capital,  we could cease to continue as a going concern.  It
should be noted that our operational  costs are higher as a result of our having
elected to be governed as a BDC.

Shares in a BDC will likely trade at a discount.

Shares of many closed-end  investment  companies and most BDC's frequently trade
at a discount to their net asset  value.  This  characteristic  is separate  and
distinct  from the risk that our net asset value  could  decrease as a result of
investment  activities.  This likely discount in share pricing in the market may
pose a greater risk to investors  expecting to sell their shares in a relatively
short period after purchase.  We cannot predict whether our shares will trade at
prices above, at or below our net asset value.

Regulations governing our operation as a business development company affect our
ability to raise, and the way in which we raise, additional capital.

We have the right to issue debt  securities  or preferred  stock  and/or  borrow
money from banks or other financial institutions, which we refer to collectively
as "senior securities," only in amounts such that our asset coverage, as defined
in the 1940 Act, equals at least 200% after each issuance of senior  securities,
the  maximum  amount  permitted  by the 1940  Act.  If the  value of our  assets
declines,  we may be unable to satisfy  this test.  If that  happens,  we may be
required  to sell a portion  of our  investments  or sell  additional  shares of
common stock and, depending on the nature of our leverage, to repay a portion of
our indebtedness at a time when such sales may be disadvantageous.  In addition,
any future  issuance of  additional  shares of our common stock could dilute the
percentage ownership of our current stockholders in us.

As a business development company regulated under provisions of the 1940 Act, we
are not  generally  able to issue and sell our common stock at a price below net
asset value per share.  We may,  however,  sell our common  stock,  or warrants,
options or rights to acquire our common stock,  at a price below the current net


                                    Page 21
<PAGE>

asset value of our common  stock (1) if our Board of Directors  determines  that
such  sale is in the  best  interests  of us and our  stockholders,  and (2) our
stockholders  approve  such  sale.  In any such  case,  the  price at which  our
securities are to be issued and sold may not be less than a price which,  in the
determination of our Board of Directors,  closely  approximates the market value
of such securities (less any sales load).

In  addition,  we may in the future  seek to  securitize  or  hypothecate  loans
previously  made  by us  to  generate  cash  for  funding  new  investments.  To
securitize or hypothecate these loans, we may contribute a pool of such loans to
a  wholly-owned  subsidiary.  This could  include the sale of  interests  in the
subsidiary  on a  non-recourse  basis to  purchasers  who we would  expect to be
willing to accept a lower interest rate to invest in investment grade loan pools
although  we would  expect to retain a portion of the equity in the  securitized
pool of loans. An inability to  successfully  securitize and sell all of part of
such a loan  portfolio  could  limit our  ability  to grow our  business,  fully
execute our business strategy and decrease our earnings,  if any. Moreover,  the
successful  securitization  of our loan  portfolio  might  expose  us to  losses
because the  residual  loans in which we do not sell  interests  will tend to be
those that are riskier and more likely to generate losses.

Our election to be governed as a BDC will require us to comply with  significant
regulatory requirements.

We elected to be regulated as a Business  Development Company under the 1940 Act
and be  subject  to  Sections  54  through  65 of said Act.  As a result of this
election,  the Company is subject to the provisions of 1940 Act as it applies to
BDCs as of the  date of  such  election.  Being  subject  to the BDC  provisions
requires  us  to  meet   significant   numbers  of   regulatory   and  financial
requirements.  Compliance  with these  regulations  is expensive  and may create
financial problems for us in the future. These laws and regulations,  as well as
their interpretation,  may be changed from time to time. Accordingly, any change
in these  laws or  regulations  could  have a  material  adverse  effect  on our
business.

Specifically,  it must be noted that there are increased  costs  associated with
compliance  with the 1940 Act as a result of our election to become a BDC. These
costs  include  costs  associated  with  the  increased  demand  for  compliance
including  oversight by our Chief Compliance  Officer and counsel to the Company
as well as increased costs due to accounting  methodology  and valuations  which
increase the time and work required of both our accounting service providers and
independent  auditors.  These costs  require us to expend  capital and resources
that might  otherwise  be used to meet the needs or  opportunities  relating  to
investments and/or our portfolio companies or other income-producing assets.

If we do not remain a business  development  company,  we might  continue  to be
regulated as a closed-end  investment  company  under the 1940 Act,  which would
decrease  our  operating  flexibility.   We  cannot  assure  you  that  we  will
successfully retain our BDC status.

If our primary investments are deemed not to be qualifying assets, we could lose
our status as a business  development  company or be  precluded  from  investing
according to our current business plan.

Under the 1940 Act,  in order to maintain  our status as a business  development
company,  we must not acquire any assets other than "qualifying  assets" unless,
at the time of and after giving effect to such acquisition,  at least 70% of our
total  assets  are  qualifying   assets.   If  we  acquire  mezzanine  loans  or
dividend-paying equity securities from an issuer that has outstanding marginable


                                    Page 22
<PAGE>

securities at the time we make an investment,  these  acquired  assets cannot be
treated  as  qualifying  assets  since the  issuer  might not be  considered  an
"eligible portfolio company" under the 1940 Act. "Marginable securities" include
any  non-equity  security,  pursuant to certain 1998  amendments to Regulation T
under the Securities Exchange Act of 1934, as amended, which raises the question
as to whether a private  company  that has  outstanding  debt  securities  would
qualify as an eligible portfolio company.

We operate in a highly competitive market for investment opportunities.

A large number of entities will compete with us to make the types of investments
that we plan to make in target portfolio  companies.  We will compete with other
business  development  companies,  public  and  private  funds,  commercial  and
investment banks and commercial financing companies. Many of our competitors are
substantially  larger and have  considerably  greater  financial,  technical and
marketing  resources than we do. For example,  some competitors may have a lower
cost of funds and access to funding  sources  that are not  available  to us. In
addition,  some of our  competitors may have higher risk tolerances or different
risk  assessments,  which  could  allow  them to  consider  a wider  variety  of
investments and establish more relationships than us.  Furthermore,  many of our
competitors  are not subject to the  regulatory  restrictions  that the 1940 Act
imposes on us as a business  development  company. We cannot assure you that the
competitive  pressures  we face will not have a material  adverse  effect on our
business,  financial  condition and results of operations.  Also, as a result of
this competition,  we may not be able to take advantage of attractive investment
opportunities  from time to time,  and we can offer no assurance that we will be
able to identify and make  investments  that are consistent  with our investment
objective.

We may never be able to qualify for the income tax benefits offered to RICs.

We will be classified  as a  non-diversified  investment  company under the 1940
Act.  Until we  achieve a  threshold  level of  diversification,  we will not be
subject to the applicable  provisions for RICs under the Internal  Revenue Code.
Therefore,  we  will  not  receive  favorable  pass  through  tax  treatment  on
distributions  to our  shareholders.  This  means  that we will be  taxed  as an
ordinary corporation on our taxable income even if that income is distributed to
shareholders,  and all  distributions  out of our  earnings  and profits will be
taxable to  shareholders  as dividends.  Thus,  this income will be subject to a
double layer of taxation.

RISKS ASSOCIATED WITH INVESTMENTS AND PORTFOLIO COMPANIES

There are costs associated with the purchase and sale of securities.

While the general approach of a BDC may suggest a long-term  holding position of
the  securities of its portfolio  companies,  some of our strategies may include
purchases of different  classes of  securities  or frequent  trading to maximize
profits  and, as a  consequence,  risks  related to  turnover  and costs such as
brokerage  commissions  may be greater than for an investment in a single entity
for a single class of security held for a longer  period of time.  Our operating
expenses,  including,  but not limited to, fees paid to accountants,  attorneys,
fees to  execute  trades,  manage  investments  and fees paid to any  investment
advisor  may, in the  aggregate,  constitute a high  percentage  relative to the
expenses and fees than for an  investment  in a single entity for a single class
of security held for a longer period of time.

There are numerous risks arising from investing in securities.


                                    Page 23
<PAGE>

The  securities  industry is  generally  competitive  and methods of  investment
strategy involve a degree of risk. We will compete with firms, including many of
the larger  securities and investment  banking firms,  which have  substantially
greater financial resources and research staffs. Where we purchase securities in
portfolio companies for appreciation,  our profitability  substantially  depends
upon our ability to correctly assess the future price movements of stocks. There
can be no assurance that we will be able to accurately  predict price  movements
of securities purchased.

Security investments generally involve a high degree of risk. The performance of
securities  in which we may invest are  subject to  numerous  factors  which are
neither within the control of nor  predictable by us. Such factors can include a
wide range of economic,  political,  competitive and other  conditions which may
affect  investments  in general or specific  industries or companies.  In recent
years,  the  securities  markets  have  become  increasingly  volatile  and this
volatility has increased the degree of risk.

Our  investments in prospective  portfolio  companies may be risky and you could
lose all or part of your investment.

We  will  invest  in  companies  that  have  relatively  short  or no  operating
histories.  These  companies  will be  subject to all of the  business  risk and
uncertainties  associated with any new business  enterprise,  including the risk
that these companies may not reach their  investment  objective and the value of
our investment in them may decline  substantially  or fall to zero.  Most of the
portfolio  companies  into which we intend to invest will be considered  "growth
stage" companies.

Investments in growth stage  companies  offer the  opportunity  for  significant
gains. However, each investment involves a high degree of business and financial
risk that can result in substantial losses. Among these are the risks associated
with:

     o    these companies may have limited financial resources and may be unable
          to meet their  obligations  under their securities that we hold, which
          may be  accompanied  by a  deterioration  in the value of their equity
          securities or of any collateral  with respect to debt securities and a
          reduction in the  likelihood of us realizing on any  guarantees we may
          have obtained in connection with our investment;

     o    they may have shorter operating histories,  narrower product lines and
          smaller  market  shares than larger  businesses,  which tend to render
          them more vulnerable to competitors' actions and market conditions, as
          well as general economic downturns;

     o    because many of these companies are privately held  companies,  public
          information  is generally not available  about these  companies.  As a
          result,  we will  depend on the ability of our  investment  adviser to
          obtain  adequate  information  to evaluate  these  companies in making
          investment  decisions.  If our investment adviser is unable to uncover
          all  material  information  about these  companies,  it may not make a
          fully  informed  investment  decision,  and we may  lose  money on our
          investments;

     o    they are more likely to depend on the  management  talents and efforts
          of a  small  group  of  persons;  therefore,  the  death,  disability,
          resignation  or termination of one or more of these persons could have
          a material  adverse  impact on our portfolio  company and, in turn, on
          us;


                                    Page 24
<PAGE>

     o    companies  operating  at a loss  or  with  substantial  variations  in
          operating  results  from  period to  period,  with the need  for,  but
          generally  limited  ability to  provide  for  internally,  substantial
          additional  capital to support  expansion  or to achieve or maintain a
          competitive position;

     o    these companies may face intense  competition,  including  competition
          from  companies  with  greater  financial  resources,  more  extensive
          development,  manufacturing,  marketing, and service capabilities, and
          larger number of qualified managerial and technical personnel; and

     o    they may have less  predictable  operating  results,  may from time to
          time be parties to litigation,  may be engaged in changing  businesses
          with  products  subject  to a risk of  obsolescence  and  may  require
          substantial  additional  capital to support their operations,  finance
          expansion or maintain their  competitive  position.  In addition,  our
          executive officers, directors and our investment adviser could, in the
          ordinary  course of business,  be named as  defendants  in  litigation
          arising from our investments in the portfolio companies.


Economic  recessions or downturns could impair our portfolio  companies and harm
our operating results.

Our portfolio companies will generally be affected by the conditions and overall
strength of the national, regional and local economies,  including interest rate
fluctuations,  changes in  markets  and  changes in the prices of their  primary
commodities and products. These factors could adversely impact the customer base
of potential portfolio  companies.  As a result, many of our portfolio companies
may be  susceptible  to economic  slowdowns or  recessions  and may be unable to
repay loans or meet other  obligations  during  these  periods.  Therefore,  our
non-performing assets are likely to increase,  and the value of our portfolio is
likely to decrease,  during these periods.  Adverse economic conditions also may
decrease the value of collateral securing some of our loans and the value of our
equity  investments.  Economic  slowdowns or recessions  could lead to financial
losses in our  portfolio  and a decrease  in  revenues,  net income and  assets.
Unfavorable economic conditions also could increase our funding costs, limit our
access to the  capital  markets or result in a decision by lenders not to extend
credit to us. These events could prevent us from increasing investments and harm
our operating results.

A  portfolio  company's  failure to satisfy  financial  or  operating  covenants
imposed  by us or  other  investors  or  lenders  could  lead to  defaults  and,
potentially, termination of loans and foreclosure on secured assets, which could
trigger  cross-defaults  under other  agreements  and  jeopardize  our portfolio
company's  ability to meet its obligations  under the debt or equity  securities
that we hold.  We may incur  expenses to the extent  necessary to seek  recovery
upon default or to negotiate new terms,  which may include the waiver of certain
financial covenants, with a defaulting portfolio company. In addition, if one of
our portfolio companies were to go bankrupt,  even though we may have structured
our  interest as senior debt or  preferred  equity,  depending  on the facts and
circumstances,  including  the extent to which we actually  provided  managerial
assistance to that portfolio  company,  a bankruptcy court might  recharacterize
our debt or equity  holding  and  subordinate  all or a portion  of our claim to
those of other creditors.

Our  portfolio  companies  may incur debt or issue equity  securities  that rank
equally with, or senior to, our investments in such companies.


                                    Page 25
<PAGE>

We intend to invest  primarily  in  mezzanine  debt and  dividend-paying  equity
securities issued by our portfolio  companies.  Our portfolio  companies usually
will have,  or may be  permitted  to incur,  other debt,  or issue other  equity
securities,  that rank equally  with,  or senior to, the  securities in which we
invest.  By their  terms,  such  instruments  may  provide  that the holders are
entitled to receive payment of dividends, interest or principal on or before the
dates on which we are entitled to receive  payments in respect of the securities
in which we invest. Also, in the event of insolvency, liquidation,  dissolution,
reorganization  or  bankruptcy  of a portfolio  company,  holders of  securities
ranking senior to our investment in that  portfolio  company would  typically be
entitled  to receive  payment  in full  before we receive  any  distribution  in
respect of our  investment.  After  repaying the senior  security  holders,  the
portfolio  company may not have any  remaining  assets to use for  repaying  its
obligation to us. In the case of securities  ranking  equally with securities in
which we invest, we would have to share on an equal basis any distributions with
other security holders in the event of an insolvency, liquidation,  dissolution,
reorganization or bankruptcy of the relevant portfolio company. In addition,  we
may not be in a position to control any portfolio company in which we invest. As
a result, we are subject to the risk that a portfolio company in which we invest
may make business  decisions  with which we disagree and the  management of such
company,  as  representatives  of the holders of their common  equity,  may take
risks or  otherwise  act in ways  that do not  serve  our  interests  as debt or
preferred equity investors.

We may not be able to fully  realize the value of any  collateral  securing  any
debt investments made into portfolio companies.

Although we expect that a  substantial  amount of our debt  investments  will be
protected  by  holding  security  interests  in  the  assets  of  the  portfolio
companies,  we may not be able to fully  realize  the  value  of the  collateral
securing any such investments due to one or more of the following factors:

     o    since these debt  investments  will be  primarily  made in the form of
          unsecured or wrap-loans,  the liens on the collateral, if any, will be
          subordinated  to those of the  senior  secured  debt of the  portfolio
          companies, if any. As a result, we may not be able to control remedies
          with respect to the collateral;

     o    the  collateral  may not be  valuable  enough  to  satisfy  all of the
          obligations under our secured loan,  particularly  after giving effect
          to the repayment of secured debt of the  portfolio  company that ranks
          senior to our loan;

     o    bankruptcy  laws may limit  our  ability  to  realize  value  from the
          collateral and may delay the realization process;

     o    our rights in the collateral may be adversely  affected by the failure
          to perfect security interests in the collateral;

     o    how  effectively  the  collateral  would be  liquidated  and the value
          received could be impaired or impeded by the need to obtain regulatory
          and contractual consents; and

     o    by its nature,  some or all of the  collateral may be illiquid and may
          have no readily ascertainable market value. The liquidity and value of
          the  collateral  could be impaired  as a result of  changing  economic
          conditions, competition, and other factors, including the availability
          of suitable buyers.


                                    Page 26
<PAGE>

Our success  will depend upon the  success of the  portfolio  companies  and, in
great part, upon the abilities of their management.

Although our management  expects to provide portfolio  companies with assistance
(particularly with regard to capital formation,  major personnel decisions,  and
strategic  planning),  the  day-to-day  operations  will  be  controlled  by the
management of the portfolio  companies.  As the portfolio companies have not all
been  identified,  investors must rely upon our  management to select  portfolio
companies that have, or can obtain, the necessary management resources.  We will
depend on the  diligence,  skill and network of business  contacts of the senior
management  of each of the  portfolio  companies  in  which  we  invest  and the
professionals chosen by them, subject to the oversight of our senior management,
and  the  information  and  interaction  between  management  of  the  portfolio
companies and our  management.  Our future  success will depend to a significant
extent on the continued  service of the senior management team of each portfolio
company,  the departure of any of whom,  could have a material adverse effect on
our ability to achieve our investment objective. Problems may arise at portfolio
companies that local management do not recognize or cannot resolve. In addition,
the management of portfolio companies may conceal the existence of problems from
us.

Many of our portfolio  investments  will be recorded at fair value as determined
in good  faith  by our  board of  directors  and,  as a  result,  there  will be
uncertainty as to the value of our portfolio investments.

A large  percentage of our portfolio  investments  will consist of securities of
privately  held or  thinly  traded  public  companies.  The fair  value of these
securities  may not be  readily  determinable.  We will value  these  securities
quarterly  at fair value as  determined  in good faith by our Board of Directors
based on input  from our audit  committee  with or  without  the  benefit  of an
opinion from a third party  independent  valuation firm. We may also be required
to value any publicly  traded  securities  at fair value as  determined  in good
faith by our Board of Directors to the extent  necessary to reflect  significant
events affecting the value of those  securities.  Our Board of Directors may, to
the extent  circumstances  warrant it,  utilize the  services of an  independent
valuation firm to aid it in determining  the fair value of any  securities.  The
types of factors that may be considered in fair value pricing of our investments
include  the  nature  and  realizable  value of any  collateral,  the  portfolio
company's  ability to make payments and its  earnings,  the markets in which the
portfolio  company  does  business,  comparison  to publicly  traded  companies,
discounted cash flow and other relevant  factors.  Because such valuations,  and
particularly  valuations  of  private  securities  and  private  companies,  are
inherently uncertain,  may fluctuate over short periods of time and may be based
on  estimates,  the  determinations  of fair value by our Board of Directors may
differ  materially  from the values that would have been used if a ready  market
for these securities existed. Our net asset value could be adversely affected if
the  determinations  regarding the fair value of our investments were materially
higher  than the values that we  ultimately  realize  upon the  disposal of such
securities.

Limitations on  availability  of investment  capital may adversely  affect other
investments.

We may be reliant on the  availability of capital to generate  profits under our
investment  strategy and such  availability will depend, in part, on our ability
to  timely  liquidate  existing  positions  in order to  reinvest  the  proceeds
thereof.  To the extent that we own securities  which are not subject to a valid
registration  statement  or otherwise  available  for trading  under  applicable


                                    Page 27
<PAGE>

securities laws, our ability to liquidate our position in such securities may be
limited.  We intend to require some of our portfolio companies to use their best
efforts to cause a registration  statement covering the resale of the securities
purchased  by us to be  filed  and  declared  effective  by the  SEC  or  become
otherwise freely tradeable.  However,  there can be no guarantee that the SEC or
other  regulating body will declare such a registration  statement  effective or
permit  such  security to become  free of  restrictions  within such period and,
until such securities become freely tradable, we will likely be unable to freely
liquidate  such  interests  in  restricted  securities  in the manner and at the
prices  desired.  This resulting  lack of liquidity  could impair our ability to
generate  the cash flow from these  positions to timely pay our  liabilities  or
obtain  funds for the  purpose of  reinvestment.  Although we intend to maintain
adequate liquidity to achieve our future investment objectives,  there can be no
assurance this can be accomplished in all circumstances.

Portfolio companies are likely to need additional funding.

We expect that many  portfolio  companies will require  additional  financing to
satisfy their working capital  requirements.  The amount of additional financing
needed will depend upon the maturity and objectives of the  particular  company.
Each round of venture financing, whether from us or other investors is typically
intended to provide a portfolio  company  with enough  capital to reach the next
major valuation milestone. If the funds provided are not sufficient, a portfolio
company may have to raise  additional  capital at a price  unfavorable to us and
the other  existing  investors.  The  availability  of  capital is  generally  a
function of capital market conditions that are beyond our control or the control
of any  portfolio  company.  We cannot  assure  you that our  management  or the
managements of portfolio companies will be able to predict accurately the future
capital  requirements  necessary  for success or that  additional  funds will be
available to portfolio  companies from any source.  If funding is not available,
some portfolio companies may be forced to cease operations.

BDC investments are generally illiquid.

We  anticipate  that  most  of our  holdings  in  portfolio  companies  will  be
securities  that are subject to restrictions  on resale.  Generally,  unless the
securities are  subsequently  registered under the 1933 Act, we will not be able
to sell these  securities  unless we meet all of the  conditions  of Rule 144 or
another  rule under the 1933 Act that  permits  limited  sales  under  specified
conditions.  When restricted securities are sold to the public, we may be deemed
an underwriter,  or possibly a controlling  person, with respect thereto for the
purpose of the  Securities Act and may be subject to liability as such under the
1933 Act. These restrictions could require us to hold securities or refrain from
sale and be unable to liquidate a position even at a loss.

Even if we meet all of the  conditions  of the 1933 Act,  there may be no market
for the  securities  that we hold.  These  limitations  on  liquidity of a BDC's
investments  could  prevent a successful  sale  thereof,  result in delay of any
sale, or  substantially  reduce the amount of proceeds  that might  otherwise be
realized.  It is possible  that one or more of the  portfolio  companies may not
qualify to rely on such exemptions or to use a registration  statement.  In such
event, we would end up owning  "restricted"  securities  subject to resale under
Rule 144

There are risks which  result from the  inherent  concentration  of  investments
prior to diversification.

While we intend to allocate our investments among different portfolio companies,
it is possible  that,  prior to our  achieving  diversification,  a  significant


                                    Page 28
<PAGE>

amount of or all of our investments  and, hence, our NAV could, at any one time,
be invested in the  securities  of just a few  portfolio  companies.  Thus,  our
success and its NAV would be  dependent  on the success of just a few  portfolio
companies  and all of the risks  associated  with  ownership  of such  portfolio
companies including success dependent on management, success dependent on market
conditions  within the industry or field of such  portfolio  companies,  success
dependent on achieving the business  objectives of such portfolio  companies and
success  dependent on economic  conditions and other conditions  relative to the
operation of such portfolio companies, would become risks borne by us.

There  are  risks   associated   with   investments   in  companies  with  small
capitalization.

The portfolio  companies that we expect to invest in are thinly  capitalized and
generally will have a market  capitalization  below $100 million (and frequently
substantially  less). These companies  generally do not have experience,  market
awareness,  tracking by analysts,  institutional investors and other benefits of
larger companies that result in more marketability and more stability pricing of
their  securities.  This  impacts the  liquidity of  securities  issued by those
portfolio companies.  It is expected that the securities of most, if not all, of
the portfolio companies will be thinly traded. This could present a problem when
we  determine  to  liquidate  our  position.  We may not be  able  to  sell  the
securities  in the time frame and at the price we would  like.  Furthermore,  in
certain  situations,  as a result of a security  being thinly  traded,  we could
experience a  significant  loss in value  should we be forced to  liquidate  our
investment as a result of rapidly changing market conditions or other factors.

There are risks  associated  with  investments in companies with securities that
are not readily marketable.

We may  invest in  securities  that are  initially,  or that later  become,  not
readily  marketable.  For example,  we may acquire  restricted  securities of an
issuer in a private  placement  pursuant  to an  arrangement  whereby the issuer
agrees  to  register  the  resale  of those  securities,  or,  in the case of an
investment in convertible or exchangeable securities,  the securities underlying
such  securities,  within a certain period of time. Such  registration  requires
compliance with United States Federal and state securities laws and the approval
of the SEC.  Unless and until such  registration  or compliance  with applicable
regulation  occurs,  there  is  likely  to  be  no  market  for  the  restricted
securities.  No  assurance  can be given  that  issuers  will not  breach  their
obligation to obtain or meet such  registration or other compliance  obligation.
Similarly,  securities that are at one time  marketable may become  unmarketable
(or more difficult to market) for a number of reasons.  For example,  securities
traded on a securities  exchange or quotation system may become  unmarketable if
delisted from such exchange or quotation system for among other reasons, failing
to satisfy the  requirements  for continued  listing,  which may include minimum
price requirements. In addition, we may acquire restricted securities, for which
no market exists, which are convertible or exchangeable into common stock of the
issuer.  No  assurances  can be given that a portfolio  company which has sold a
convertible  security  requiring  exchange  or  conversion,  will not breach its
obligation to convert or exchange such securities upon demand, in which case our
liquidity may be adversely affected.  In general, the stability and liquidity of
the   securities   in  which  we  invest  will  depend  in  large  part  on  the
creditworthiness of the issuers.  Issuers' creditworthiness will be monitored on
an  ongoing  basis by us.  If  there is a  default  by the  issuer,  we may have
contractual  remedies  under  the  applicable  transaction  documents.  However,
exercising  such  contractual  rights  may  involve  delays in  liquidating  our
position and the incurrence of additional costs.


                                    Page 29
<PAGE>

Portfolio  companies  in which  investments  are  made may have  publicly-traded
securities  but those  companies  or their  securities  may  become  subject  to
restrictions  due to  non-compliance.  Our ability to generate  profits from our
investment  activities  may be  adversely  affected  by a failure  of  portfolio
companies to comply with registration, conversion, exchange or other obligations
under the agreements pursuant to which such securities have been sold to us. The
failure of an issuer to  register  the resale of its  securities  sold to us may
decrease  the  amount  of  available  capital  with  which we may  pursue  other
investment  opportunities  or  meet  current  liabilities.   We  may  invest  in
securities  that are convertible  into or  exchangeable  for common stock of the
issuer,  the  resale  of which by us is (or is to be)  registered.  If an issuer
refuses,  is unable to, or delays in timely  honoring  its  obligation  to issue
conversion or exchange securities, our ability to liquidate our position will be
adversely affected, and our profits may be adversely affected.

We have not yet identified all of the potential investments for our portfolio.

We have not yet identified all of the potential  investments  for our portfolio,
and,  thus,  you will not be able to evaluate all of our  potential  investments
prior to purchasing  shares of our common  stock.  This factor will increase the
uncertainty, and thus the risk, of investing in our shares.

We may sustain losses from fraud within our portfolio companies.

The risk of fraud losses on our assets  varies  with,  among other  things,  the
effectiveness of security procedures utilized. Management anticipates that fraud
losses,  if any, will be unlikely as controls and other  security  measures will
have been adopted by each portfolio  company as a condition to our investment to
protect against fraudulent  misappropriation of cash and other assets.  However,
although our  management  believes  that any loss due to fraud will be unlikely,
there can be no assurance that fraud loss experience will not become material in
amount.  Fraud at the BDC level is far less likely as BDC's are required to have
and to have tested controls to limit this possibility. It must be noted that, in
addition to basic controls as to financial  data,  BDC's are required to have in
place certain  safeguards which may render risks to investment assets from fraud
to be nominal  but these  risks do exist and even  requirements  such as holding
physical  certificates of shares in portfolio companies in a safe do not, in and
of themselves, eliminate the possibility of fraud.

Our investments in foreign securities may involve  significant risks in addition
to the risks inherent in U.S. investments.

Our  investment  strategy  contemplates  potential  investments in securities of
foreign  companies.  Investing in foreign  companies may expose us to additional
risks not typically  associated  with investing in U.S.  companies.  These risks
include  changes  in  exchange   control   regulations,   political  and  social
instability, expropriation, imposition of foreign taxes, less liquid markets and
less  available  information  than is  generally  the case in the  U.S.,  higher
transaction  costs,  less  government  supervision  of  exchanges,  brokers  and
issuers,  less developed  bankruptcy laws,  difficulty in enforcing  contractual
obligations, lack of uniform accounting and auditing standards and greater price
volatility.  Although  we  expect  that  most  of our  investments  will be U.S.
dollar-denominated,  our investments  that are denominated in a foreign currency
will be subject to the risk that the value of a particular  currency will change
in relation to one or more other  currencies.  Among the factors that may affect
currency  values are trade  balances,  the level of short-term  interest  rates,
differences  in  relative  values of  similar  assets in  different  currencies,
long-term  opportunities for investment and capital appreciation,  and political
developments.


                                    Page 30
<PAGE>

We may employ hedging  techniques to minimize  these risks,  but we can offer no
assurance  that such  strategies  will be  effective.  If we  engage in  hedging
transactions,   we  may  expose   ourselves  to  risks   associated   with  such
transactions.  We may utilize  instruments such as forward  contracts,  currency
options  and  interest  rate  swaps,  caps,  collars and floors to seek to hedge
against  fluctuations  in the relative  values of our portfolio  positions  from
changes in currency exchange rates and market interest rates.  Hedging against a
decline  in the  values  of our  portfolio  positions  does  not  eliminate  the
possibility of fluctuations in the values of such positions or prevent losses if
the values of such positions decline.  However, such hedging can establish other
positions designed to gain from those same developments,  thereby offsetting the
decline in the value of such portfolio  positions.  Such hedging transaction may
also limit the  opportunity  for gain if the values of the  portfolio  positions
should increase.  Moreover,  it may not be possible to hedge against an exchange
rate or interest rate fluctuation  that is so generally  anticipated that we are
not able to enter into a hedging transaction at an acceptable price. The success
of our hedging  transactions  will depend on our  ability to  correctly  predict
movements,  currencies and interest  rates.  Therefore,  while we may enter into
such  transactions  to seek to reduce  currency  exchange rate and interest rate
risks,  unanticipated  changes in currency  exchange rates or interest rates may
result in poorer overall  investment  performance  than if we had not engaged in
any such hedging  transactions.  In addition,  the degree of correlation between
price  movements  of the  instruments  used  in a  hedging  strategy  and  price
movements in the  portfolio  positions  being hedged may vary.  Moreover,  for a
variety of reasons,  we may not seek to establish a perfect  correlation between
such hedging  instruments  and the portfolio  holdings  being  hedged.  Any such
imperfect  correlation  may prevent us from  achieving  the  intended  hedge and
expose us to risk of loss. In addition, it may not be possible to hedge fully or
perfectly  against  currency  fluctuations  affecting  the  value of  securities
denominated  in non-U.S.  currencies  because the value of those  securities  is
likely to fluctuate as a result of factors not related to currency fluctuations.

RISKS OF THE COMPANY AT ITS PRESENT STAGE

Although  we have  been in  existence  for a number  of  years,  we may still be
considered to have a limited operating history as a BDC. We are a relatively new
business development company with limited resources and sources of revenues.

We were formed in March of 1996 and we have commenced investment  operations but
the  extent  of  our  investment  activities  may  characterize  us  as a  newer
investment  company. We made our election to become a BDC on March 7, 2006, and,
as we have made an investment in only one portfolio  company within our targeted
industry, we have limited experience relating to the identification,  evaluation
and acquisition of target businesses and,  accordingly,  there is only a limited
basis upon which to evaluate our prospects  for achieving our intended  business
objectives.  We have limited  resources  and have realized  limited  revenues to
date. In addition,  we will not achieve any revenues until, at the earliest,  we
are able to obtain funding, make investments and sell our position of securities
in an underlying portfolio company for a profit. We will be wholly dependent for
the selection,  structuring, closing and monitoring of all of our investments on
the diligence and skill of our  management,  acting under the supervision of our
Board of Directors. None of these individuals has substantial experience, within
the BDC business  format,  in acquiring and investing in growth stage companies,
the  negotiation  of the terms of such  investments  and the  monitoring of such
investments  after they are made.  We cannot  assure you that we will attain our
investment objective.


                                    Page 31
<PAGE>

We are subject to all of the business risks and  uncertainties  associated  with
any new  business  enterprise,  including  the risk that we will not achieve our
investment  objective and that the value of your  investment in us could decline
substantially or fall to zero.

We will be confronted by competition from entities having substantially  greater
resources and experience.

Other entities and individuals compete for investments similar to those proposed
to be made by us,  many of whom  will  have  greater  financial  and  management
resources than we do.  Furthermore,  we must comply with  provisions of the 1940
Act  pertaining to BDCs and, if we qualify as a RIC,  provisions of the Internal
Revenue Code  pertaining to RICs might restrict our flexibility as compared with
our competitors.  The need to compete for investment  opportunities  may make it
necessary for us to offer portfolio companies more attractive  transaction terms
than  otherwise  might be the  case.  These  factors  may  prevent  us from ever
becoming profitable.

We have historically incurred losses and losses may continue in the future.

We have  historically  lost money.  Accordingly,  we may experience  significant
liquidity and cash flow problems if we are not able to raise additional  capital
as needed and on acceptable  terms.  No assurances  can be given that we will be
successful in reaching or maintaining profitable operations.

Distributions  to  shareholders  may never  equal  the  amount  invested  by the
shareholders.

We cannot assure you that any  distributions to shareholders  will be made by us
or that aggregate distributions,  if any, will equal or exceed the shareholders'
investment  in us. Sales of  portfolio  company  securities  will be a principal
source  of  distributable  cash to  shareholders.  The  Board of  Directors  has
absolute  discretion in the timing of distributions to shareholders.  Securities
acquired by us through equity investments will be held by us and will be sold or
distributed at the sole discretion of the Board of Directors.

There are significant  potential  conflicts of interest,  which could impact our
investment returns

Our  executive  officer(s)  and  Director(s)  serve or may serve as officers and
directors  of entities who operate in the same or related line of business as we
do. Accordingly,  they may have obligations to investors in those entities,  the
fulfillment  of  which  might  not  be in  the  best  interests  of  us  or  our
stockholders.  It is  possible  that new  investment  opportunities  that  would
otherwise meet our  investment  objective may come to the attention of one these
entities,  and, if so, such opportunity might not be offered,  or otherwise made
available,  to us.  However,  our executive  officer(s) and  Director(s) do have
fiduciary  obligations  to  act  in our  best  interests  and  must,  in  such a
circumstance or conflict,  endeavor to allocate  investment  opportunities  in a
fair and  equitable  manner  over  time so as not to  discriminate  one  company
against another,  where equal fiduciary obligations are owed. In addition,  they
may not be available to us if there are time conflicts involving other entities.

Our  common  stock is  subject  to the  "Penny  Stock"  rules of the SEC and the
trading market in our  securities is limited,  which makes  transactions  in our
stock cumbersome and may reduce the value of an investment in our stock.

The Securities and Exchange  Commission has adopted Rule 15g-9 which establishes
the  definition  of a "penny  stock,"  for the  purposes  relevant to us, as any


                                    Page 32
<PAGE>

equity  security  that has a market price of less than $5.00 per share or option
to acquire any equity  security  with an  exercise  price of less than $5.00 per
share,  subject to certain  exceptions.  For any  transaction  involving a penny
stock, unless exempt, the rules require:

     o    that a broker or dealer approve a person's account for transactions in
          penny stocks; and
     o    the broker or dealer receive from the investor a written  agreement to
          the transaction,  setting forth the identity and quantity of the penny
          stock to be purchased.

In order to approve a person's  account for  transactions  in penny stocks,  the
broker or dealer must:

     o    obtain financial  information and investment  experience objectives of
          the person; and
     o    make a reasonable  determination that the transactions in penny stocks
          are suitable for that person and the person has  sufficient  knowledge
          and  experience in financial  matters to be capable of evaluating  the
          risks of transactions in penny stocks.

The broker or dealer  must also  deliver,  prior to any  transaction  in a penny
stock, a disclosure  schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:

     o    sets  forth  the  basis  on  which  the  broker  or  dealer  made  the
          suitability determination; and
     o    that the broker or dealer  received a signed,  written  agreement from
          the investor prior to the transaction.

Generally,  brokers may be less willing to execute  transactions  in  securities
subject  to the  "penny  stock"  rules.  This  may  make it more  difficult  for
investors to dispose of our common stock and cause a decline in the market value
of our stock.

Disclosure  also has to be made about the risks of  investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative,  current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock  transactions.  Finally,  monthly  statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.

We have limited operating history upon which to base your investment decision.

While we  started  operations  in March of  1996,  we have a  limited  operating
history available to evaluate the likelihood of the success of our business.  We
became a BDC on March 7, 2006.  Our  prospects  should be considered in light of
the risks,  expenses and  uncertainties  that may be  encountered by development
stage companies. Among other things, we must build our customer base, respond to
competitive  developments,  attract, retain and motivate qualified employees and
establish and maintain our  technologies,  products,  and services on an ongoing
basis.  There can be no assurance that we will be successful in addressing  such
risks and implementing our business strategy.


                                    Page 33
<PAGE>

As a result of our lack of  operating  history,  and the other  risks  described
herein,  we are unable to accurately  forecast our revenues.  Our future expense
levels are based  predominately  on our operating  plans and estimates of future
revenues,  and to a large extent are fixed.  We may be unable to adjust spending
in a  timely  manner  to  compensate  for  revenues  that  do  not  materialize.
Accordingly,  any  significant  shortfall  in revenues or lack of revenue  would
likely have an immediate  material  adverse  effect on our  business,  operating
results and financial condition.

Our ability to generate  revenues  will  depend  upon many  factors.  We will be
required  to build our  business by  implementing  operational  systems,  hiring
additional employees, developing and implementing a marketing and sales strategy
and implementing our technology applications. Our expenses will initially exceed
our revenues and no  assurances  can be made that we will become  profitable  or
provide positive cash flows.


We cannot assure you that we will be successful in selling the common shares or,
if sold, at what price.  We have limited assets without the sale of these common
shares and we cannot assure you that we will attain our investment objective.

As of the date of filing of our Form 10K, we have  minimal  cash or other assets
and net worth from which to invest in successful  portfolio  companies to insure
our success.  Our success will depend, in part, upon raising the necessary funds
to fund investments.

Restrictions  imposed  upon the resale of our  capital  stock may require you to
hold your stock for an indefinite period of time.

None of the  securities  to be issued based upon future sales will be registered
under the  Securities  Act. The common stock to be sold is intended to be exempt
from  registration  pursuant  to  Regulation  E  which  permits,  in  conformity
therewith,  issuance of shares without restriction on further transfer. While we
do not anticipate such an adverse  decision or  determination on the part of the
Securities and Exchange Commission, the SEC has the right, even after permitting
the offering to become effective,  to enjoin the sale of securities or determine
that such  sales are not  exempt  under  Regulation  E. While we will make every
effort to insure our compliance with the requirements  under Regulation E, there
can be no  assurance  of such  exemption;  as the SEC does  not,  as a matter of
policy,  affirmatively  indicate the  effectiveness  of the  notification  under
Regulation E.

CERTAIN GOVERNMENT REGULATIONS

We operate in a highly regulated environment. The following discussion generally
summarizes certain government regulations.


BUSINESS  DEVELOPMENT  COMPANY.  A business  development  company is defined and
regulated by the 1940 Act. A business  development  company must be organized in
the  United  States  for the  purpose of  investing  in or lending to  primarily
private companies and making managerial assistance available to them. A business
development  company may use capital  provided by public  shareholders  and from
other sources to invest in long-term, private investments in businesses.

As a business  development  company,  we may not  acquire  any asset  other than
"qualifying  assets" unless,  at the time we make the acquisition,  the value of
our qualifying  assets  represent at least 70% of the value of our total assets.
The principal categories of qualifying assets relevant to our business are:


                                    Page 34
<PAGE>

(1) Securities  purchased in transactions not involving any public offering from
the  issuer  of such  securities,  which  issuer  (subject  to  certain  limited
exceptions) is an eligible portfolio company,  or from any person who is, or has
been  during  the  preceding  13 months,  an  affiliated  person of an  eligible
portfolio  company,  or from any other  person,  subject to such rules as may be
prescribed  by the SEC. An "eligible  portfolio  company" is defined in the 1940
Act as any issuer which:

     (a)  is  organized  under  the  laws  of,  and has its  principal  place of
          business in, the United States;

     (b)  is not an investment  company (other than a small business  investment
          company wholly owned by the business development company) or a company
          that would be an investment  company but for certain  exclusions under
          the 1940 Act; and

     (c)  satisfies any of the following:

          o    does not have any class of  securities  with  respect  to which a
               broker or dealer may extend margin credit;
          o    is  controlled  by a business  development  company or a group of
               companies  including  a  business  development  company  and  the
               business  development  company has an affiliated  person who is a
               director of the eligible portfolio company; or
          o    is a small and solvent  company  having  total assets of not more
               than $4  million  and  capital  and  surplus  of not less than $2
               million.

(2) Securities of any eligible portfolio company which we control.

(3) Securities purchased in a private transaction from a U.S. issuer that is not
an  investment  company  or from  an  affiliated  person  of the  issuer,  or in
transactions  incident  thereto,  if the issuer is in bankruptcy  and subject to
reorganization  or if the  issuer,  immediately  prior  to the  purchase  of its
securities was unable to meet its obligations as they came due without  material
assistance other than conventional lending or financing arrangements.

(4) Securities of an eligible  portfolio  company purchased from any person in a
private  transaction  if there is no ready  market  for such  securities  and we
already own 60% of the outstanding equity of the eligible portfolio company.

(5)  Securities  received in exchange for or  distributed  on or with respect to
securities  described  in (1) through (4) above,  or pursuant to the exercise of
warrants or rights relating to such securities.

(6) Cash, cash  equivalents,  U.S.  Government  securities or high-quality  debt
maturing in one year or less from the time of investment.

To include  certain  securities  described  above as  qualifying  assets for the
purpose of the 70% test, a business  development  company must make available to
the  issuer  of  those  securities  significant  managerial  assistance  such as
providing   significant   guidance  and  counsel   concerning  the   management,
operations,  or business  objectives  and  policies of a portfolio  company,  or
making loans to a portfolio company.  We offer to provide managerial  assistance
to each of our portfolio companies.


                                    Page 35
<PAGE>

As a business development company, we are entitled to issue senior securities in
the form of stock or senior securities representing indebtedness, including debt
securities and preferred  stock, as long as each class of senior security has an
asset coverage ratio of at least 200% immediately after each such issuance.  See
"Risk  Factors."  We may also be  prohibited  under the 1940 Act from  knowingly
participating  in certain  transactions  with our  affiliates  without the prior
approval of our Independent  Directors and, in some cases, prior approval by the
SEC.

As with  other  companies  regulated  by the 1940 Act,  a  business  development
company   must  adhere  to  certain   other   substantive   ongoing   regulatory
requirements.  A  majority  of  our  directors  must  be  persons  who  are  not
"interested persons," as that term is defined in the 1940 Act. Additionally,  we
are  required  to provide and  maintain a bond  issued by a  reputable  fidelity
insurance company to protect the business development company. Furthermore, as a
business  development company, we are prohibited from protecting any director or
officer  against any liability to the company or our  shareholders  arising from
willful  misfeasance,  bad faith,  gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.

We maintain a code of ethics that establishes procedures for personal investment
and  restricts  certain  transactions  by our  personnel.  Our  code  of  ethics
generally does not permit  investment by our employees in securities that may be
purchased  or held by us.  You may read and copy our code of ethics at the SEC's
Public  Reference  Room in  Washington,  D.C.  You  may  obtain  information  on
operations of the Public Reference Room by calling the SEC at (202) 942-8090. In
addition,  our code of ethics is  available  on the  EDGAR  Database  on the SEC
Internet  site at  http://www.sec.gov.  You may  obtain  copies  of our  code of
ethics,  after paying a duplicating fee, by electronic  request at the following
email address:  publicinfo@sec.gov,  or by writing to the SEC's Public Reference
Section, 100 F Street, NE, Washington, D.C. 20549.

We may not change the nature of our  business  so as to cease to be, or withdraw
our election as, a business  development  company unless authorized by vote of a
"majority of the outstanding voting  securities," as defined in the 1940 Act, of
our shares.  A majority of the  outstanding  voting  securities  of a company is
defined  by the 1940 Act as the  lesser  of:  (i) 67% or more of such  company's
shares present at a meeting if more than 50% of the  outstanding  shares of such
company  are  present  and  represented  by proxy,  or (ii) more than 50% of the
outstanding shares of such company.

We are periodically examined by the SEC for compliance with the 1940 Act.


ITEM 2 DESCRIPTION OF PROPERTIES

We currently  maintain our corporate  office,  comprising 750 square feet at 520
South Fourth Avenue,  Suite 400,  Louisville,  Kentucky 40202-2577 on a month to
month basis,  at no cost to the company.  The fair value of this rental space is
not material. We believe these facilities, which are in good physical condition,
are adequate for our needs for the next 12 to 24 months.


ITEM 3 LEGAL PROCEEDINGS - PHOTONICS CORPORATION

The Company is subject to legal proceedings that arise in the ordinary course of
business.  Primarily,  these  lawsuits  were the  result of  defaulted  accounts
payable of Photonics prior to the merger with REPipeline.com, Inc.


                                    Page 36
<PAGE>

     1.   Abstract  of  judgment  dated  October  12,  1999;  Plaintiff  Insight
          Electronics.   Defendant  Data  Technologies  Corporation.  Amount  of
          judgment:  $110,252.00.  In the third quarter of 2005,  the Registrant
          entered into a settlement  agreement with Insight  Electronics whereby
          the Registrant would agree to pay $30,000 to settle the debt. The debt
          was settled in August 2005.

     2.   Default Judgment February 17, 2000, Plaintiff Danka Funding Company v.
          Defendant  Photonics,  Docket  No.  L-8482-99,  Superior  Court of New
          Jersey Law  Division,  Bergen  County  for  $40,474.00  with  proposed
          settlement offer by Danka of $ 30,355.72 as of March 22, 2000.  (lease
          of Kodak 85 Copier) Notice of Judgment dated November 29, 2000,  Santa
          Clara  County  Superior  Court -  Central  District,  Plaintiff  Danka
          Funding Company,  LLC v. Defendant  Photonics  Corporation.  Amount of
          judgment $ 41,341.89.  In the third  quarter of 2005,  the  Registrant
          entered into a settlement  agreement  with Danka  Funding  whereby the
          Registrant  would  agree to pay $250 to settle the debt.  The debt was
          settled in August 2005.

     3.   Litigation  Superior Court,  Contra Costa County,  CA., Plaintiff L.A.
          Commercial Group, Inc (Bay Alarm) Defendant Photonics Corporation, for
          the amount of $8,666.00.  In the third quarter of 2005,  every attempt
          to contact the debtor for  settlement  was  pursued,  but could not be
          located. The debt was written off in the third quarter.

     4.   Default Judgment, Dallas County, Texas, Clerk of the County Courts Law
          No. 5, Bowne of Dallas,  LP v.  Photonics  Corporation,  et al,  cause
          number cc-02-14411-e,  for $28,641, in July 2003. In the third quarter
          of 2005, the Registrant entered into a settlement agreement with Bowne
          of Dallas whereby the Registrant  would agree to pay $17,500 to settle
          the debt. The debt was settled in August 2005.

In the third  quarter of 2005,  the Company  settled  additional  non-litigation
debts totaling $34,495.42 for $646.37. For the year ended December 31, 2005, the
Company recognized $174,133 in income from the gain on forgiveness/settlement of
debt (see Note 13).

In addition,  Photonics  Corporation  has the following  liens filed against its
assets:

       1.   Type of lien:          Personal Property Tax
            Lien holder:           State of California/ Santa Clara County
            Amount of lien:        $5,444.87
            Date of lien:          November 6, 1998
            Debtor:                Photonics Corporation


       2    Type of lien:          Personal Property Tax
            Lien holder:           State of California/ Santa Clara County
            Amount of lien:        $6,119.54
            Date of lien:          November 5, 1999
            Debtor:                Photonics Corporation

In June 2004,  Tom Bailey made various  verbal  threats to instigate  litigation
against the Company and its current and former  management to be reimbursed  for
the legal fees he incurred while defending  himself against the Fonteno lawsuit,
along with other claims of harm that Mr. Bailey may have  suffered.  Although no
formal action or complaint has been filed,  current management believes there is


                                    Page 37
<PAGE>

a possibility,  although the Company's  legal counsel has not fully reviewed Mr.
Bailey's employment contract to offer an opinion on the potential exposure,  the
Company could be liable for up to $30,000 of legal fees Mr. Bailey  incurred for
his defense.

New management of Photonics is not currently aware of any additional  pending or
threatened legal actions,  but believes there is a distinct  possibility of such
actions.  Management  is not able to  quantify  such  actions in relation to the
financial statements represented herein.

LEGAL PROCEEDINGS - REPIPELINE.COM, INC., which could affect Photonics

Around  June  2000,   REpipeline.com,   Inc.  (Texas)  acquired  the  assets  of
Realestate4sale.com  (RE4S).  One of the assets REpipeline did not acquire was a
claim by RE4S against Doug Fonteno. Prior to his displacement from RE4S on April
1, 2000,  Mr.  Fonteno made  numerous non interest  bearing  advances to him and
several entities controlled by him totaling approximately $183,906.  Previously,
on April 28, 2000,  the Board of Directors of  Realestate4sale.com  had voted to
expunge  all shares of RE4S owned by Mr.  Fonteno,  his  family  members  and/or
affiliated companies,  which were issued for inadequate consideration and lacked
proper  approval by the Board of Directors of RE4S.  These shares were cancelled
and are not held in treasury.

The lawsuit against Mr. Fonteno was dropped by the Board in the third quarter of
2001 when the Company  was unable to  continue to pay for legal fees  associated
with the lawsuit.  REpipeline.com's  management  does not believe the outcome of
its  lawsuit  with RE4S  founder  will have an adverse  effect on the  Company's
financial  position,  operating  results or cash flows. On October 18, 2001, Mr.
Fonteno filed a lawsuit against REpipeline.com,  Photonics,  and former officers
and directors of the Company,  including Tom Bailey and Chip Langston,  claiming
various  charges and claims of wrongdoing.  In June of 2004, Tom Bailey and Chip
Langston  informed  current  management that all parties in the suit have agreed
upon a  settlement.  Since the Company was never  formally  served the  lawsuit,
current  management does not know what the settlement  entails and cannot assess
its potential exposure.

There is a lien from the State of Texas against REpipeline.com,  Inc. for unpaid
wages to a former employee. The amount of the lien is for $14,344.27.

On October 13, 2001,  Today's Staffing,  Inc. sued  Repipeline.com in the Second
Court of Dallas County for unpaid fees  associated with  telemarketing  services
provided to the Company.  Management  has not  responded  and believes a default
judgment  will be  entered  against  the  Company.  The  lawsuit  is for  $7,096
including $1,774 in legal fees.

Management  is not able to quantify  such risk or exposure to  additional  legal
actions in relation to the financial statements represented herein.

There are various other  threatened or perceived  lawsuits,  but none have acted
against the Company.


ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted to a vote of security holders during the fourth
quarter.


                                    Page 38
<PAGE>

                                     PART II

ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET

The  Company's  Common  Stock  trades  on the Over The  Counter  Bulletin  Board
("OTCBB") under the symbol: PHOX

HISTORICAL MARKET PRICE DATA FOR THE COMMON STOCK OF PHOTONICS CORPORATION

These prices represent prices between  broker-dealers  and do not include retail
markups and markdowns or any commission to  broker-dealers.  In addition,  these
prices do not reflect prices in actual transactions.

The  following  table sets forth the range of high and low closing  sales prices
for Photonics Common Stock for the periods indicated:

                                                    High           Low

        Fiscal Year Ending December 31, 2004
                   First Quarter                   $0.020         $0.004
                   Second Quarter                  $0.015         $0.004
                   Third Quarter                   $0.008         $0.001
                   Fourth Quarter                  $0.006         $0.002
        Fiscal Year Ending December 31, 2005
                   First Quarter                   $0.0079        $0.002
                   Second Quarter                  $0.008         $0.0025
                   Third Quarter                   $0.0146        $0.0035
                   Fourth Quarter                  $0.013         $0.0045


NUMBER OF SHAREHOLDERS AND TOTAL OUTSTANDING SHARES

As of December 31, 2005, there were  approximately  811 holders of record of our
common stock and we had 132,309,075 common shares issued and outstanding.

DIVIDENDS

The Company  has not  historically  paid cash  dividends.  The Company  does not
anticipate paying any cash dividends in the foreseeable future.

PREFERRED SHARES

The Company is authorized to issue 50,000,000 shares of Preferred Stock,  $0.001
par value  (Preferred  Stock).  On December  15, 2005,  the Company  amended its
articles of incorporation to designate  400,000 shares of the 50,000,000  shares
of preferred stock authorized as Series A Convertible Preferred Stock with a par
value of $.001 per share.

As of December 31, 2005,  the Company had 400,000 shares of Series A Convertible
Preferred Stock (Series A Preferred  Stock) issued and  outstanding  held by one
shareholder, an officer and director of the Company. A 6% distribution per share
is payable per annum,  at the Company's  fiscal year end, on a cumulative  basis
based upon the  specified  redemption  value of each share of Series A Preferred
Stock.  If any dividend or other  distribution  is declared on the common stock,
each  holder  of shares  of  Series A  Preferred  Stock on record on the date of
declaration  shall be  entitled  to receive  the  equivalent  dividend  or other
distribution  as if the  shares  had been  converted  into  common  stock at the


                                    Page 39
<PAGE>
<TABLE>
<CAPTION>

declaration  date.  All Series A Preferred  Stock have equal voting  rights with
common stock.  The shares may be converted,  at any time,  into shares of common
stock as  specified by the  "conversion  ratio" that is in effect at the time of
conversion.  The  initial  "conversion  ratio" for the entire  class of Series A
Preferred  Stock is equal to 12.5% of the  total  outstanding  shares  of common
stock. The Company has the right, at any time, to call for mandatory  redemption
of all the shares of Series A Preferred Stock at a set redemption price of $1.25
per share.

OPTIONS

As of December 31, 2005,  there are  8,679,039  common  shares  reserved for the
exercise of options of a former  management  team at an exercise  price of $0.01
per option. The former management team is G. Thomas Bailey  (7,354,039),  Joseph
"Chip" Langston (700,000),  and Michael Craven (625,000).  All other options and
option agreements have been cancelled.


ITEM 6 SELECTED FINANCIAL DATA

The following table sets forth selected financial data as of and for each of the
three fiscal years ended  December 31, 2005,  2004 and 2003, and is derived from
our audited  financial  statements.  The data set forth below  should be read in
conjunction  with "Item 8: Financial  Statements" and related Notes to Financial
Statements appearing elsewhere herein and "Item 7: "Management's  Discussion and
Analysis of Financial Condition and Results of Operations".

                                         2005             2004             2003
                                    -------------    -------------    -------------
<S>                                 <C>              <C>              <C>
Revenues                            $        --      $        --      $        --

Administrative expenses                    86,125           72,932           87,557

Net loss from operations                  (86,125)         (72,932)         (87,557)

Other Income (Expense)                    166,960             --               --

Income (loss) before income taxes          80,835          (72,932)         (87,557)

Net Income (loss)                          80,835          (72,932)         (87,557)

Net Income (loss) applicable to
Common stock                               79,520          (72,932)         (87,557)

Income (loss) per share
       Basic                                 0.00            (0.00)           (0.00)
       Diluted                               0.00            (0.00)           (0.00)


Balance Sheet Data:
Investments at fair value           $     315,729    $        --
Cash                                      607,245              100
Total assets                              922,974              100
Total liabilities                         685,331          291,492
Total Stockholder's Deficit              (263,672)        (291,392)
Common stock outstanding
  at year end                         132,309,075      119,309,075
</TABLE>


                                    Page 40
<PAGE>

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Management's Analysis of Business

We will have significant  relative  flexibility in selecting and structuring our
investments.  We will not be subject to many of the regulatory  limitations that
govern traditional lending institutions such as banks. We will seek to structure
our  investments  so as to take  into  account  the  uncertain  and  potentially
variable financial  performance of our portfolio  companies.  This should enable
our  portfolio  companies  to retain  access to  committed  capital at different
stages in their  development and eliminate some of the  uncertainty  surrounding
their  capital  allocation  decisions.  We will  calculate  rates of  return  on
invested capital based on a combination of up-front commitment fees, current and
deferred  interest rates and residual values,  which may take the form of common
stock,  warrants,  equity  appreciation  rights or future contract payments.  We
believe that this flexible  approach to structuring  investments will facilitate
positive,  long-term relationships with our portfolio companies and enable us to
become a  preferred  source of capital to them.  We also  believe  our  approach
should enable debt financing to develop into a viable alternative capital source
for  funding  the  growth of target  companies  that wish to avoid the  dilutive
effects of equity financings for existing equity holders.

Longer  Investment  Horizon - We will not be subject to periodic  capital return
requirements. These requirements, which are standard for most private equity and
venture  capital funds,  typically  require that these funds return to investors
the initial  capital  investment  after a  pre-agreed  time,  together  with any
capital  gains on such capital  investment.  These  provisions  often force such
funds to seek the return of their  investments  in portfolio  companies  through
mergers,  public equity  offerings or other  liquidity  events more quickly than
they  otherwise  might,  which can result in a lower overall return to investors
and adversely affect the ultimate viability of the affected portfolio companies.
Because we may invest in the same  portfolio  companies as these  funds,  we are
subject to these risks if these funds  demand a return on their  investments  in
the portfolio  companies.  We believe that our flexibility to take a longer-term
view should  help us to maximize  returns on our  invested  capital  while still
meeting the needs of our portfolio companies.

Established Deal Sourcing Network - We believe that,  through our management and
directors,  we have solid contacts and sources from which to generate investment
opportunities. These contacts and sources include:

     o    public and private companies,
     o    investment bankers,
     o    attorneys,
     o    accountants,
     o    consultants, and
     o    commercial bankers.

However,  we  cannot  assure  you  that  such  relationships  will  lead  to the
origination of debt or other investments.

Investment Criteria

As a matter of policy, we will not purchase or sell real estate or interests in
real estate or real estate investment trusts except that we may:


                                    Page 41
<PAGE>

     o    purchase  and  sell  real  estate  or  interests  in  real  estate  in
          connection  with  the  orderly  liquidation  of  investments,   or  in
          connection with foreclosure on collateral;
     o    own the  securities  of companies  that are in the business of buying,
          selling or developing  real estate;  or o finance the purchase of real
          estate by our portfolio companies.

We will limit our investments in more traditional securities (stock and debt
instruments) and will not, as a matter of policy:

     o    sell  securities  short  except  with  regard  to  managing  the risks
          associated  with  publicly-traded  securities  issued by our portfolio
          companies;
     o    Purchase  securities  on  margin  (except  to the  extent  that we may
          purchase  securities with borrowed money); or o engage in the purchase
          or sale of  commodities  or  commodity  contracts,  including  futures
          contracts except where necessary in working out distressed loan; or
     o    investment situations or in hedging the risks associated with interest
          rate  fluctuations,  and,  in such  cases,  only  after all  necessary
          registrations  or  exemptions  from  registration  with the  Commodity
          Futures Trading Commission have been obtained.

Prospective  Portfolio  Company  Characteristics  - We have  identified  several
criteria  that we  believe  will  prove  important  in  seeking  our  investment
objective with respect to target companies.  These criteria will provide general
guidelines for our investment  decisions;  however,  we caution readers that not
all of these criteria will be met by each prospective portfolio company in which
we choose to invest.

Experienced  Management - We will generally require that our portfolio companies
have an  experienced  president  or  management  team.  We will also require the
portfolio  companies to have in place proper  incentives to induce management to
succeed and to act in concert with our interests as investors,  including having
significant  equity  interests.  We intend to  provide  assistance  in this area
either  supervising   management  or  providing  management  for  our  portfolio
companies.

Products or Services - We will seek  companies  that are involved in products or
services  that  do  not  require  significant  additional  capital  or  research
expenditures. In general, we will seek target companies that make innovative use
of proven technologies or methods.

Proprietary  Advantage - We expect to favor companies that can demonstrate  some
kind of proprietary  sustainable  advantage  with respect to their  competition.
Proprietary advantages include, but are not limited to:

     o    patents or trade secrets with respect to owning or  manufacturing  its
          products, and
     o    a  demonstrable   and   sustainable   marketing   advantage  over  its
          competition

Marketing  strategies  impose unusual  burdens on management to be  continuously
ahead of its competition, either through some kind of technological advantage or
by being continuously more creative than its competition.

Profitable or Nearly Profitable  Operations Based on Cash Flow from Operations -
We will focus on target companies that are profitable or nearly profitable on an


                                    Page 42
<PAGE>

operating cash flow basis.  Typically, we would not expect to invest in start-up
companies unless there is a clear exit strategy in place.

Potential  for Future  Growth - We will  generally  require  that a  prospective
target  company,  in addition to  generating  sufficient  cash flow to cover its
operating  costs and service its debt,  demonstrate  an ability to increase  its
revenues and operating  cash flow over time.  The  anticipated  growth rate of a
prospective target company will be a key factor in determining the value that we
ascribe  to any  warrants  or other  equity  securities  that we may  acquire in
connection with an investment in debt securities.

Exit Strategy - Prior to making an investment  in a portfolio  company,  we will
analyze the  potential  for that company to increase the liquidity of its common
equity through a future event that would enable us to realize  appreciation,  if
any, in the value of our equity interest. Liquidity events may include:

     o    an initial public offering,
     o    a private sale of our equity interest to a third party,
     o    a merger or an acquisition of the portfolio company, or
     o    a purchase of our equity  position by the portfolio  company or one of
          its stockholders.

We may  acquire  warrants  to  purchase  equity  securities  and/or  convertible
preferred stock of the eligible portfolio companies in connection with providing
financing.  The terms of the warrants,  including the expiration date,  exercise
price and terms of the equity  security for which the warrant may be  exercised,
will be negotiated  individually with each eligible portfolio company,  and will
likely be affected by the price and terms of  securities  issued by the eligible
portfolio company to other venture  capitalists and other holders. We anticipate
that most  warrants  will be for a term of five to ten  years,  and will have an
exercise price based upon the price at which the eligible portfolio company most
recently  issued  equity  securities  or, if a new equity  offering is imminent,
equity securities. The equity securities for which the warrant will be exercised
generally  will be common  stock of which  there may be one or more  classes  or
convertible  preferred  stock.  Substantially  all the warrants  and  underlying
equity  securities will be restricted  securities under the 1933 Act at the time
of the issuance.  We will generally  negotiate for registration  rights with the
issuer that may provide:

     o    "piggyback"  registration  rights,  which will permit us under certain
          circumstances, to include some or all of the securities owned by us in
          a registration statement filed by the eligible portfolio company, or
     o    in  circumstances,  "demand"  registration  rights permitting us under
          certain  circumstances,  to require the eligible  portfolio company to
          register  the  securities  under  the 1933 Act,  in some  cases at our
          expense.  We will generally  negotiate net issuance  provisions in the
          warrants,  which will allow us to receive upon exercise of the warrant
          without  payment of any cash a net amount of shares  determined by the
          increase in the value of the issuer's  stock above the exercise  price
          stated in the warrant.

Liquidation  Value of  Assets -  Although  we do not  intend  to  operate  as an
asset-based  lender,  the prospective  liquidation  value of the assets, if any,
collateralizing  any debt securities that we hold will be an important factor in
our credit analysis. We will emphasize both tangible assets, such as:

     o    accounts receivable,
     o    inventory, and
     o    equipment,


                                    Page 43
<PAGE>

and intangible assets, such as:

     o    intellectual property,
     o    customer lists,
     o    networks, and
     o    databases.

Investment Process

Due  Diligence  -  If a  target  company  generally  meets  the  characteristics
described above, we will perform initial due diligence, including:

     o    company and technology assessments,
     o    existing management team,
     o    market analysis,
     o    competitive analysis,
     o    evaluation of management, risk analysis and transaction size,
     o    pricing, and
     o    structure analysis.

Much of this  work will be done by  management  and  professionals  who are well
known by management.  The criteria  delineated above provide general  parameters
for our  investment  decisions.  We intend to pursue an  investment  strategy by
further  imposing  such  criteria and reviews that best insures the value of our
investments.  As unique circumstances may arise or be uncovered, not all of such
criteria will be followed in each instance but the process  provides a guideline
by  which  investments  can be  prudently  made  and  managed.  Upon  successful
completion of the  preliminary  evaluation,  we will decide whether to deliver a
non-binding  letter of intent  and move  forward  towards  the  completion  of a
transaction.

In our review of the management team, we look at the following:

     o    Interviews with management and significant shareholders, including any
          financial  or strategic  sponsor;  o Review of  financing  history;  o
          Review of management's track record with respect to:
               o    product development and marketing,
               o    mergers and acquisitions,
               o    alliances,
               o    collaborations,
               o    research and  development  outsourcing  and other  strategic
                    activities;
     o    Assessment of competition; and
     o    Review of exit strategies.

In our review of the financial conditions, we look at the following:

     o    Evaluation of future financing needs and plans;
     o    Detailed analysis of financial performance;
     o    Development of pro forma financial projections; and
     o    Review of assets and liabilities, including contingent liabilities, if
          any, and legal and regulatory risks.


                                    Page 44
<PAGE>

In our review of the products and services of the portfolio company,  we look at
the following:

     o    Evaluation of intellectual property position;
     o    Review of existing customer or similar agreements and arrangements;
     o    Analysis of core technology;
     o    Assessment of collaborations;
     o    Review of sales and marketing procedures; and
     o    Assessment of market and growth potential.

Upon  completion  of these  analyses,  we will conduct  on-site  visits with the
target company's management team. Also, in cases in which a target company is at
a mature  stage  of  development  and if  other  matters  that  warrant  such an
evaluation, we will obtain an independent appraisal of the target company.

Ongoing Relationships with Portfolio Companies

Monitoring - We will  continuously  monitor our portfolio  companies in order to
determine  whether they are meeting our financing  criteria and their respective
business  plans.  We may decline to make  additional  investments  in  portfolio
companies that do not continue to meet our financing  criteria.  However, we may
choose to make additional  investments in portfolio companies that do not do so,
but we believe that we will nevertheless perform well in the future.

We will monitor the  financial  trends of each  portfolio  company to assess the
appropriate  course of action for each company and to evaluate overall portfolio
quality. Our management team and consulting professionals, who are well known by
our management  team,  will closely  monitor the status and  performance of each
individual company on at least a quarterly and, in some cases, a monthly basis.

We will use several  methods of evaluating and monitoring  the  performance  and
fair value of our debt and equity  positions,  including  but not limited to the
following:

     o    Assessment  of  business   development   success,   including  product
          development,  financings,  profitability  and the portfolio  company's
          overall adherence to its business plan;
     o    Periodic and regular  contact with  portfolio  company  management  to
          discuss financial position, requirements and accomplishments;
     o    Periodic and regular formal update  interviews with portfolio  company
          management and, if appropriate, the financial or strategic sponsor;
     o    Attendance at and participation in board meetings;
     o    Review of monthly and  quarterly  financial  statements  and financial
          projections for portfolio companies.

Managerial Assistance - As a business development company, we will offer, and in
many cases may  provide,  significant  managerial  assistance  to our  portfolio
companies. This assistance will typically involve:

     o    monitoring the operations of our portfolio companies,
     o    participating in their board and management meetings,
     o    consulting with and advising their officers, and
     o    providing other organizational and financial guidance.


                                    Page 45
<PAGE>

Investment Amounts

The  amount  of  funds  committed  to a  portfolio  company  and  the  ownership
percentage  received  will  vary  depending  on the  maturity  of the  portfolio
company,  the quality and  completeness  of the portfolio  company's  management
team,  the perceived  business  opportunity,  the capital  required  compared to
existing capital,  and the potential return.  Although  investment  amounts will
vary considerably,  we expect that the average  investment,  including follow-on
investments, will be between $25,000 and $1,000,000.

Competition

Our primary  competitors to provide  financing to target  companies will include
private  equity and venture  capital funds,  other equity and  non-equity  based
investment funds and investment banks and other sources of financing,  including
traditional  financial services companies such as commercial banks and specialty
finance companies.  Many of these entities have substantially  greater financial
and  managerial  resources  than we will have.  We believe that our  competitive
advantage  with  regard to quality  target  companies  relates to our ability to
negotiate  flexible  terms and to complete our review process on a timely basis.
We cannot assure you that we will be successful in implementing our strategies.

FORWARD LOOKING STATEMENTS

Certain  statements  contained in this report that are not  historical  fact are
"forward-looking  statements" as that term is defined in the Private  Securities
Litigation  Reform Act of 1995. The words or phrases "will likely  result," "are
expected  to,"  "will  continue,"  "is  anticipated,"  "believes,"  "estimates,"
"projects" or similar expressions are intended to identify these forward-looking
statements.  These statements are subject to risks and uncertainties  beyond our
reasonable  control  that  could  cause  our  actual  business  and  results  of
operations  to differ  materially  from those  reflected in our  forward-looking
statements.  The safe harbor  provisions  provided in the Securities  Litigation
Reform Act do not apply to  forward-looking  statements  we make in this report.
Forward-looking  statements  are  not  guarantees  of  future  performance.  Our
forward-looking  statements  are  based on  trends  which we  anticipate  in our
industry  and our good  faith  estimate  of the  effect on these  trends of such
factors as industry capacity,  product demand and product pricing. The inclusion
of projections  and other  forward-looking  statements  should not be regarded a
representation by us or any other person that we will realize our projections or
that any of the  forward-looking  statements  contained in this  prospectus will
prove to be accurate.


RESULTS OF  OPERATIONS  FOR THE YEAR ENDED  DECEMBER  31, 2005  COMPARED TO YEAR
ENDED DECEMBER 31, 2004 AND TO YEAR ENDED DECEMBER 31, 2003

REVENUES

The company did not produce any revenue in the period ending  December 31, 2005.
The company did not produce any revenue in the same period last year nor did the
company  produce any revenue for the period ended December 31, 2003. The Company
did not produce any revenue in the period ended December 31, 2005 inasmuch as it
had ceased  operations in contemplation of a significant  change in its business
model.  With no  operations  under  its old  model  and the fact that it had not
commenced  acting as a BDC, save the acquisition of a portfolio  company,  there
were no  opportunities  for revenue during the most recent  periods.  During the
year ending December 31, 2005, the company did not dispose of assets for cash or
other proceeds.  Hence,  the company did not realize revenue during this period.
It must be noted that the company did make substantial  investments  during this


                                    Page 46
<PAGE>

period for which management  believes the  opportunities  for future revenue are
greater than in previous periods.


COSTS AND EXPENSES

The  Company's  expenses  increased  by 18% to  $86,125  for the  period  ending
December 31, 2005 up from $72,932 for the same period last year.  The  company's
expenses from the period ended December 31, 2003 were $87,557

The income before taxes was $80,835 for the period  ending  December 31, 2005 up
from a loss of $72,932  for the same period last year and from a loss of $87,557
in the period ended December 31, 2003.

For the twelve months ended December 31, 2005, the Company  incurred General and
Administrative costs of $86,125 and Depreciation and Amortization costs of $0 as
compared to $72,932 and $0,  respectively for the same period last year. For the
period ended December 31, 2003, the Company's General and  Administrative  costs
were $87,557 and Depreciation and Amortization costs were $0.

CAPITAL EXPENDITURES

Capital expenditures will be made consistent with the operation of a BDC.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  management  believes it has a good mix of cash and  resources to
sustain operation for 2006.

ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and
prices.  We are  primarily  exposed to equity  price risk.  The  following  is a
discussion of our equity market risk.

Equity price risk arises from exposure to securities that represent an ownership
interest in our portfolio companies.  The value of our equity securities and our
other  investments  are based on quoted market prices or our Board of Directors'
good faith determination of their fair value (which is based, in part, on quoted
market  prices).  Market prices of common  equity  securities,  in general,  are
subject to  fluctuations,  which could cause the amount to be realized upon sale
or exercise of the instruments to differ significantly from the current reported
value.  The  fluctuations  may result from  perceived  changes in the underlying
economic  characteristics  of our  portfolio  companies,  the relative  price of
alternative  investments,  general  market  conditions  and  supply  and  demand
imbalances for a particular security.


Basis of presentation.

The preparation of financial  statements in conformity  with Generally  Accepted
Accounting Principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.


                                    Page 47
<PAGE>

                              PHOTONICS CORPORATION
                                TABLE OF CONTENTS



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.......................49

BALANCE SHEETS.............................................................50-51

STATEMENTS OF OPERATIONS......................................................52

STATEMENTS OF STOCKHOLDERS' DEFICIT...........................................53

STATEMENTS OF CASH FLOWS...................................................54-55

SCHEDULE OF INVESTMENTS.......................................................56

NOTES TO FINANCIAL STATEMENTS..............................................57-67












                                    Page 48
<PAGE>

             Report of Independent Registered Public Accounting Firm


Board of Directors
Photonics Corporation
Dallas, Texas


We have audited the  accompanying  balance  sheets of Photonics  Corporation  at
December 31, 2005 and 2004, including the schedule of investments as of December
31, 2005, and the related  statements of operations,  stockholders'  deficit and
cash flows for the period  December  16, 2005 through  December  31,  2005,  the
period  January 1, 2005  through  December  15, 2005 and each of the years ended
December 31, 2004 and 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 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 financial  statements  referred to above present fairly, in
all material respects,  the financial position of Photonics  Corporation,  as of
December 31, 2005 and 2004, and the results of its operations and its cash flows
for the above  referenced  periods  in  conformity  with  accounting  principles
generally accepted in the United States of America.

As discussed in Note 2 to the financial  statements,  accounting principles used
in the preparation of the financial statements beginning December 16, 2005 (upon
becoming an  investment  company under the  Investment  Company Act of 1940) are
different than those of prior periods and therefore are not directly comparable.



 /x/ Turner, Stone & Company, LLP
----------------------------------
Turner, Stone & Company, LLP

Certified Public Accountants
Dallas, Texas
March 29, 2006





                                    Page 49
<PAGE>

                              PHOTONICS CORPORATION
                                  BALANCE SHEET

                                DECEMBER 31, 2005


                                     Assets
                                     ------

Investments:
  Investments in, net of advances from controlled
    companies, at fair value (cost of $315,729)                     $   315,729
                                                                    -----------

    Total Investments                                                   315,729

Cash                                                                    607,245
                                                                    -----------

    Total Assets                                                    $   922,974
                                                                    ===========


                      Liabilities and Stockholders' Deficit
                      -------------------------------------


Liabilities:
  Accounts payable, trade                                           $    11,564
  Accrued expenses                                                        7,172
  Advances from stockholders                                            108,595
  Note payable - Affiliate                                              100,000
  Note payable - Officer                                                458,000
                                                                    -----------

    Total Liabilities                                                   685,331
                                                                    -----------

Commitments and Contingencies

Series A Convertible Preferred Stock, redeemable, cumulative 6%,
  $.001 par value, 400,000 shares authorized,
  400,000 shares issued and outstanding, at liquidation value           501,315
                                                                    -----------

Stockholders' Deficit:
  Preferred stock, $.001 par value, 49,600,000 shares authorized,
    zero shares issued and outstanding                                     --
  Common stock, $.001 par value, 200,000,000 shares authorized,
    132,309,075 shares issued and outstanding                           132,309
  Additional paid in capital                                          2,205,472
  Retained earnings (deficit)                                        (2,601,453)
                                                                    -----------

    Total Stockholders' Deficit                                        (263,672)
                                                                    -----------

    Total Liabilities and Stockholders' Deficit                     $   922,974
                                                                    ===========


                                    Page 50
<PAGE>
<TABLE>
<CAPTION>

                              PHOTONICS CORPORATION
                                  BALANCE SHEET

                                DECEMBER 31, 2004


                                     Assets
                                     ------

<S>                                                                      <C>
Current Assets:
  Cash                                                                   $       100
                                                                         -----------

    Total Current Assets                                                         100
                                                                         -----------


    Total Assets                                                         $       100
                                                                         ===========


                      Liabilities and Stockholders' Deficit
                                                                         -----------


Current Liabilities:
  Accounts payable, trade                                                $   234,093
  Advances from stockholders                                                  57,399
                                                                         -----------

    Total Current Liabilities                                                291,492
                                                                         -----------

    Total Liabilities                                                        291,492
                                                                         -----------

Commitments and Contingencies

Stockholders' Deficit:
  Preferred stock, $.001 par value, 50,000,000 shares authorized,
    zero shares issued and outstanding                                          --
  Common stock, $.001 par value, 200,000,000 shares authorized,
    119,309,075 shares issued and outstanding                                119,309
  Additional paid in capital                                               2,270,272
  Retained earnings (deficit accumulated during the development stage)    (2,680,973)
                                                                         -----------

    Total Stockholders' Deficit                                             (291,392)
                                                                         -----------


    Total Liabilities and Stockholders' Deficit                          $       100
                                                                         ===========
</TABLE>



                                    Page 51
<PAGE>
<TABLE>
<CAPTION>

                                              PHOTONICS CORPORATION

                                             STATEMENTS OF OPERATIONS


                                                                    Prior to becoming an Investment Company
                                                           --------------------------------------------------------
                                          Period from         Period from
                                         Dec. 16, 2005       Jan. 1, 2005         Year Ended          Year Ended
                                       to Dec. 31, 2005    to Dec. 15, 2005      Dec. 31, 2004       Dec. 31, 2003
                                       ----------------    ----------------    ----------------    ----------------
<S>                                    <C>                 <C>                 <C>                 <C>
Revenues                               $           --      $           --      $           --      $           --
                                       ----------------    ----------------    ----------------    ----------------

Cost and Expenses:
  General and administrative                        126              85,999              72,932              87,557
                                       ----------------    ----------------    ----------------    ----------------
                                                    126              85,999              72,932              87,557
                                       ----------------    ----------------    ----------------    ----------------

Income (loss) from operations                      (126)            (85,999)            (72,932)            (87,557)
                                       ----------------    ----------------    ----------------    ----------------

Other income (expense):
  Gain on extinguishment of debt                   --               174,133                --                  --
  Interest                                       (1,474)             (5,699)               --                  --
                                       ----------------    ----------------    ----------------    ----------------
                                                 (1,474)            168,434                --                  --
                                       ----------------    ----------------    ----------------    ----------------

Income (loss) before income taxes                (1,600)             82,435             (72,932)            (87,557)

Provision (benefit) for income taxes               --                  --                  --                  --
                                       ----------------    ----------------    ----------------    ----------------

Net income (loss)                                (1,600)             82,435             (72,932)            (87,557)

Dividends on 6% convertible
  preferred stock                                 1,315                --                  --                  --
                                       ----------------    ----------------    ----------------    ----------------

Net income (loss) applicable to
  common stock                         $         (2,915)   $         82,435    $        (72,932)   $        (87,557)
                                       ================    ================    ================    ================

Income (loss) per share:
  Basic                                $          (0.00)   $           0.00    $          (0.00)   $          (0.00)
  Diluted                              $          (0.00)   $           0.00    $          (0.00)   $          (0.00)

Weighted average common shares
 outstanding:
  Basic                                     131,371,575         123,911,815         116,205,216         110,400,000
  Diluted                                   131,371,575         140,590,854         116,205,216         110,400,000
</TABLE>





                                    Page 52
<PAGE>
<TABLE>
<CAPTION>

                                                       PHOTONICS CORPORATION

                                                STATEMENTS OF STOCKHOLDERS' DEFICIT
                                    FOR THE PERIOD FROM DECEMBER 16, 2005 TO DECEMBER 31, 2005,
                                       THE PERIOD FROM JANUARY 1, 2005 TO DECEMBER 15, 2005,
                                    AND FOR EACH OF THE YEARS ENDED DECEMBER 31, 2004 AND 2003



                                                                                          Additional     Retained         Total
                                   Preferred Stock                 Common Stock            Paid in       Earnings     Stockholders'
                                Shares         Amount         Shares         Amount        Capital       (Deficit)       Deficit
                            -------------  -------------  -------------  -------------  -------------  -------------  -------------
<S>                         <C>            <C>            <C>            <C>            <C>            <C>            <C>

Balance, December 31, 2002      1,000,000          1,000     89,400,000         89,400      2,227,727     (2,520,484)      (202,357)

  Issuance of common stock
    for services                     --             --       21,000,000         21,000          5,000           --           26,000

  Cancellation of
    preferred stock            (1,000,000)        (1,000)          --             --            1,000           --             --

  Net Loss                           --             --             --             --             --          (87,557)       (87,557)
                            -------------  -------------  -------------  -------------  -------------  -------------  -------------

Balance, December 31, 2003           --             --    1  10,400,000        110,400      2,233,727     (2,608,041)      (263,914)

Issuance of common stock
for services                         --             --        8,909,075          8,909         36,545           --           45,454

Net Loss                             --             --             --             --             --          (72,932)       (72,932)
                            -------------  -------------  -------------  -------------  -------------  -------------  -------------

Balance, December 31, 2004           --             --    1  19,309,075        119,309      2,270,272     (2,680,973)      (291,392)

  Issuance of common stock
    for services                     --             --       10,000,000         10,000         30,000           --           40,000

Net Income                           --             --             --             --             --           82,435         82,435
                            -------------  -------------  -------------  -------------  -------------  -------------  -------------

Balance, December 15, 2005           --             --    1  29,309,075        129,309      2,300,272     (2,598,538)      (168,957)

  Issuance of convertible
    preferred stock in
    connection with
    acquisition of ACL               --             --             --             --         (100,000)          --         (100,000)

  Issuance of common stock
    for settlement of
    shareholder advances             --             --        3,000,000          3,000          5,200           --            8,200

  Dividends on convertible
    preferred stock                  --             --             --             --             --           (1,315)        (1,315)

  Net Loss                           --             --             --             --             --           (1,600)        (1,600)
                            -------------  -------------  -------------  -------------  -------------  -------------  -------------

Balance, December 31, 2005           --             --    1  32,309,075        132,309      2,205,472     (2,601,453)      (263,672)
                            =============  =============  =============  =============  =============  =============  =============
</TABLE>


                                    Page 53
<PAGE>
<TABLE>
<CAPTION>

                                                  PHOTONICS CORPORATION
                                                STATEMENTS OF CASH FLOWS


                                                                             Prior to becoming an Investment Company
                                                                    --------------------------------------------------------
                                                Period from         Period from
                                                  Dec. 16, 2005       Jan. 1, 2005         Year Ended          Year Ended
                                                to Dec. 31, 2005    to Dec. 15, 2005      Dec. 31, 2004       Dec. 31, 2003
                                                ----------------    ----------------    ----------------    ----------------
<S>                                             <C>                 <C>                 <C>                 <C>
Cash flows from operating activities:

  Cash received from customers                  $           --      $           --      $           --      $           --
  Cash paid to suppliers                                    (126)            (94,396)            (33,000)            (24,299)
  Cash paid to employees                                    --                  --                  --                  --
  Interest paid                                             --                  --                  --                  --
  Income taxes paid                                         --                  --                  --                  --
                                                ----------------    ----------------    ----------------    ----------------

    Net cash used by operating activities                   (126)            (94,396)            (33,000)            (24,299)
                                                ----------------    ----------------    ----------------    ----------------

Cash flows from investing activities:

  Cash payments made for acquisition                    (735,000)               --                  --                  --
  Cash advances from ACL                               1,277,271                --                  --                  --
                                                ----------------    ----------------    ----------------    ----------------

    Net cash provided by investing activities            542,271                --                  --                  --
                                                ----------------    ----------------    ----------------    ----------------

Cash flows from financing activities:

  Proceeds from note payable - affiliate                  65,000              35,000                --                  --
  Advances from stockholders                                --                59,396              33,100              24,299
                                                ----------------    ----------------    ----------------    ----------------

    Net cash provided by financing activities             65,000              94,396              33,100              24,299
                                                ----------------    ----------------    ----------------    ----------------

Net increase in cash                                     607,145                --                   100                --

Cash at beginning of the period                              100                 100                --                  --
                                                ----------------    ----------------    ----------------    ----------------

Cash at end of the period                       $        607,245    $            100    $            100    $           --
                                                ================    ================    ================    ================
</TABLE>











                                    Page 54
<PAGE>
<TABLE>
<CAPTION>

                                                  PHOTONICS CORPORATION
                                                STATEMENTS OF CASH FLOWS


                                                                          Prior to becoming an Investment Company
                                                                  --------------------------------------------------------
                                                 Period from         Period from
                                                Dec. 16, 2005       Jan. 1, 2005        Year Ended          Year Ended
                                              to Dec. 31, 2005    to Dec. 15, 2005     Dec. 31, 2004       Dec. 31, 2003
                                              ----------------    ----------------    ----------------    ----------------
<S>                                           <C>                 <C>                 <C>                 <C>
Reconciliation of net income (loss) to net
  cash used by operating activities:

  Net Income (Loss)                           $         (1,600)   $         82,435    $        (72,932)   $        (87,557)

Adjustments to reconcile net income (loss)
  to net cash used by operating activities:
    Common stock issued for services                      --                40,000              45,454              26,000
    (Increase) decrease in prepaid expenses               --                  --                  --                37,258
    Increase (decrease) in accounts payable               --              (222,530)             (5,522)               --
    Increase (decrease) in accrued expenses              1,474               5,699                --                  --
                                              ----------------    ----------------    ----------------    ----------------

  Net cash used by operating activities       $           (126)   $        (94,396)   $        (33,000)   $        (24,299)
                                              ================    ================    ================    ================


Supplemental disclosure of non-cash
  investing and financing activities:

    Common stock issued in exchange
      for services                            $           --      $         40,000    $         45,454    $         26,000

    Common stock issued as settlement
      of shareholder advances                 $          8,200    $           --      $           --      $           --

    Note payable incurred in conjunction
      with acquisition                        $        458,000    $           --      $           --      $           --

    Convertible preferred stock issued in
      conjunction with acquisition            $        500,000    $           --      $           --      $           --

    Convertible preferred stock
      dividends accrued but not paid          $          1,315    $           --      $           --      $           --
</TABLE>













                                    Page 55
<PAGE>
<TABLE>
<CAPTION>

                                               PHOTONICS CORPORATION
                                              SCHEDULE OF INVESTMENTS


                                                                                           December 31, 2005
                                                        Title of Security  Percentage of  -------------------
      Portfolio Company               Industry           Held by Company     Class Held   Fair Value     Cost
      -----------------               --------           ---------------     ----------   ----------     ----
<S>                                   <C>                <C>                 <C>          <C>            <C>
Investments in, net of advances
  from controlled companies:

ACL Consulting Corporation       Professional Services     Common Stock         100%      $  315,729   $ 315,729

The Sarasota Group, Inc.         Inactive                  Common Stock         100%             -           -
                                                                                          ----------   ---------

Total investments                                                                         $  315,729   $ 315,729
                                                                                          ==========   =========
</TABLE>
















                                    Page 56
<PAGE>

                              PHOTONICS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1        GENERAL ORGANIZATION AND BUSINESS

Photonics  Corporation  (the  Company),  formerly  dba DTC  Data  Technology,  a
California  corporation,  began from a merger of Photonics  Corp.  with DTC Data
Technology  in March of 1996.  The  Company  did  design,  develop,  and  market
Integrated  Device  Electronics  (IDE),  Small Computer Systems Interface (SCSI)
disk controller cards, and Input/Output  (I/O) products for personal  computers.
However,  as a result of recurring  significant  operating losses, in June 1999,
the board of directors  voted to shut down  business  operations  and attempt to
sell the Company or its assets.  Since that date and through  December 15, 2005,
the Company was inactive and in the development stage (see below).

On  November  28,  2000,  the  Company  merged  with  REPipeline.com,   a  Texas
corporation, an Internet vertical service provider to the commercial real estate
industry,  by  issuing  18,127,707  common  stock  shares  valued at  $18,128 in
exchange for all of the outstanding common stock of REPipeline.com,  Inc. (REP).
Immediately  after the  merger,  the  Company  transferred  the net  assets  and
business   operations   to   REPipeline.com,   Inc.,  a  Delaware   corporation,
incorporated on June 8, 2000 as a wholly owned subsidiary of the Company.

Prior  to  this  merger  on  July  10,  2000,  REPipeline.com,   Inc.,  a  Texas
corporation,  also  incorporated on June 8, 2000,  agreed to purchase the assets
and   assume   the   certain    liabilities   and   shareholder's    equity   of
RealEstate4Sale.com.  RealEstate4Sale.com (RE4S) was incorporated in Colorado on
August 17, 1999, and its purpose was to provide  commercial real estate listings
on the  Internet.  However,  the  concept  was  deemed to be too  narrow for the
marketplace,  which requires a wider variety of services to the commercial  real
estate market over the Internet, which is best addressed by the expanded concept
of REP.

The  transaction was accounted for as a reverse merger using the purchase method
of accounting with REP acquiring Photonics for financial reporting purposes. The
purchase  price of Photonics was  allocated  among its net assets based on their
relative  fair  values.  Because  Photonics  did not  have any  assets  and only
liabilities and had no business operations, no portion of the purchase price was
allocated to goodwill.  Instead,  the excess of the purchase price over the fair
value of net assets acquired has been charged  against  operations and reflected
in the accompanying financial statements as an acquisition cost.

In October 2001, the Company acquired all of the outstanding common stock of The
Sarasota Group, Inc. (SGI), a Florida corporation,  in exchange for the issuance
of 1,000,000  convertible  preferred  stock shares and  14,200,000  common stock
shares.  At the same time,  the  Company's  then current  officers and directors
resigned and the Company  elected new officers and  directors.  Since then,  the
preferred shares of stock have been cancelled.

SGI was  incorporated  on  November  13,  2001,  and both prior to and after the
acquisition  had no assets,  liabilities  or business  operations.  The purchase
price,  which exceeded the fair value of net assets  acquired,  has been charged
against operations and reflected in the accompanying  financial statements as an
acquisition cost.

In December 2005, the Company  entered into a Stock Purchase  Agreement with ACL
Consulting  Corporation  (ACL),  an entity  majority  owned by an officer of the
Company.  The Stock  Purchase  Agreement  has rights of  rescission  that can be
exercised by the Seller.  The Stock Purchase Agreement was effective on December
16, 2005 (Note 3).

Upon acquisition of ACL on December 16, 2005, the Company became a
non-diversified internally managed, closed-end investment company under the
Investment Company Act of 1940, as amended, and no longer considered itself as
being in the development stage.


                                    Page 57
<PAGE>


NOTE 2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
Beginning December 16, 2005, the accompanying  financial  statements reflect the
separate  accounts  of  Photonics  Corporation,   and  the  related  results  of
operations.  In accordance with Article 6 of Regulation S-X under the Securities
Act of  1933  and  Securities  Exchange  Act  of  1934,  the  Company  does  not
consolidate portfolio company investments in which the Company has a controlling
interest.

Prior to December 16, 2005, the accompanying  consolidated  financial statements
included the  accounts of the Company and those of its wholly owned  subsidiary,
The Sarasota Group, Inc., a Florida corporation.  All intercompany transactions,
accounts, and balances have been eliminated in the consolidation.  There were no
material  intercompany  transactions  during the periods presented.  SGI did not
have any assets,  liabilities,  or business  operations  at the time the Company
became  an  investment  company,  therefore,  there  was  no  cumulative  effect
recognition in the accompanying financial statements upon becoming an investment
company.

Although  the nature of the  Company's  operations  and its  reported  financial
position,  results  of  operations,  and its cash flows are  dissimilar  for the
periods  prior to and  subsequent  to its becoming an  investment  company,  its
financial  position  for the  years  ended  December  31,  2005 and 2004 and its
operating results,  cash flows and changes in stockholders'  deficit for each of
the years ended December 31, 2005 (separated as indicated above),  2004 and 2003
are presented in the accompanying  financial statements pursuant to Article 6 of
Regulation S-X. In addition, the accompanying  footnotes,  although different in
nature as to the required disclosures and information reported therein, are also
presented as they relate to each of the above referenced periods.

Conversion to an Investment Company
-----------------------------------
The Company's  results of operations for 2005 are divided into two periods.  The
period from January 1, 2005 to December 15, 2005 reflects the Company's  results
prior to becoming an  investment  company  under the  Investment  Company Act of
1940,  as amended.  The period  from  December  16,  2005 to  December  31, 2005
reflects the  Company's  results as an investment  company under the  Investment
Company Act of 1940, as amended.  Accounting  principles used in the preparation
of the financial statements beginning December 16, 2005 are different than those
of  prior  periods  and,  therefore,  the  financial  position  and  results  of
operations of these periods are not directly comparable. The primary differences
in  accounting  principles  relate to the carrying  value of  investments  - see
corresponding sections below for further discussions.

Development Stage Activities
----------------------------
Through  December 15, 2005, the Company was inactive and considered to be in the
development stage. Accordingly,  all of the Company's operating results and cash
flows  reported in the  accompanying  financial  statements for periods prior to
this date were  considered to be those related to development  stage  activities
and represent the `cumulative from inception' amounts from its development stage
activities  reported  pursuant to Statements of Financial  Accounting  Standards
(SFAS) No. 7,  Accounting and Reporting by  Development  Stage  Enterprises.  In
connection  with the Company's  acquisition of ACL Consulting  Corporation,  the
Company is no longer considered a development stage company.

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

Income (Loss) per Share
-----------------------
Basic  income  (loss) per common  share is computed  by dividing  the net income
(loss) amount adjusted for cumulative  dividends on preferred stock  (numerator)
by the weighted  average number of common shares  outstanding  during the period
(denominator).  Diluted  income  (loss) per common  share  amounts  reflect  the
maximum  dilution that would have  resulted  from the assumed  exercise of stock
options  (Note 7) and from the assumed  conversion  of the Series A  Convertible
Preferred  Stock (Note 4). Diluted income (loss) per common share is computed by
dividing  the net income  (loss)  amount  adjusted for  cumulative  dividends on
preferred  stock by the  weighted  average  number  of  common  and  potentially
dilutive  securities  outstanding during the period. For the period December 16,
2005  through  December  31, 2005 and for the years ended  December 31, 2004 and
2003,  the  above  potentially   dilutive   securities  are  excluded  from  the
computation as their effect is anti-dilutive.


                                    Page 58
<PAGE>

NOTE 2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes
------------
The  Company  has  not  elected  to  be a  regulated  investment  company  under
Subchapter M of the Internal Revenue Code of 1986, as amended.  Accordingly, the
Company will be subject to U.S. federal income taxes on sales of investments for
which the fair values are in excess of their tax basis (Note 6).

Income  taxes  are  accounted  for  using an asset and  liability  approach  for
financial reporting.  The Company recognizes deferred tax liabilities and assets
for the expected future tax  consequences of temporary  differences  between the
financial  statement carrying amount and the tax basis of assets and liabilities
and net operating loss and tax credit carry forwards.  Valuation  allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.

Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows,  the Company  considers all highly
liquid  investments  purchased with an original maturity date of three months or
less to be cash equivalents. None of the Company's cash is restricted.

Valuation of Investments (as an Investment Company)
---------------------------------------------------
As an investment company under the Investment Company Act of 1940, all of the
Company's investments must be carried at market value or fair value as
determined by management for investments which do not have readily determinable
market values. Prior to this conversion, only marketable debt and equity
securities and certain derivative securities were required to be carried at
market value.

Beginning  December  16,  2005,  portfolio  assets for which  market  prices are
available  are  valued  at  those  prices.  Securities  that are  traded  in the
over-the-counter  market or on a stock exchange  generally will be valued at the
prevailing  bid price on the valuation  date.  However,  the  Company's  current
investments  were  acquired in  privately  negotiated  transactions  and have no
readily  determinable market values.  These securities are carried at fair value
as determined by management  and outside  professionals  as necessary  under the
Company's  valuation  policy.  Currently,  the  valuation  policy  provides  for
management's review of the management team, financial  conditions,  and products
and  services of the  portfolio  company.  In  situations  that  warrant such an
evaluation, an independent business valuation may be obtained.

Value,  as defined in Section  2(a)(41) of 1940 Act, is (i) the market price for
those securities for which a market quotation is readily  available and (ii) for
all other  securities  and assets,  fair value is as determined in good faith by
management.  There is no single  standard  for  determining  fair  value in good
faith. As a result,  determining fair value requires that judgment be applied to
the specific facts and circumstances of each portfolio  investment.  The Company
must  determine  the fair value of each  individual  investment  on a  quarterly
basis.  The Company will record  unrealized  depreciation on investments when it
believes that an investment has become impaired,  including where realization of
an equity security is doubtful.  Conversely,  the Company will record unrealized
appreciation if the Company believes that the underlying  portfolio  company has
appreciated in value and,  therefore,  its  investment  has also  appreciated in
value, where appropriate.

As an investment  company,  the Company invests primarily in illiquid securities
including equity securities of private  companies.  The structure of each equity
security  is  specifically  negotiated  to enable the  Company  to  protect  its
investment and maximize its returns.  The Company generally  includes many terms
governing ownership parameters,  dilution parameters,  liquidation  preferences,
voting rights, and put or call rights.  The Company's  investments are generally
subject to some restrictions on resale and generally have no established trading
market. Because of the type of investments that the Company makes and the nature
of its business, the Company's valuation process requires an analysis of various
factors. The Company's fair value methodology includes the examination of, among
other things, the underlying  investment  performance,  financial  condition and
market changing events that impact valuation.


                                    Page 59
<PAGE>

NOTE 2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Comprehensive Income
--------------------
SFAS  No.  130,  Reporting  Comprehensive  Income,   establishes  standards  for
reporting  and display of  comprehensive  income and its  components  (revenues,
expenses,  gains,  and  losses)  in a  full  set  of  general-purpose  financial
statements.  It requires that all items that are required to be recognized under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial  statements.  SFAS No. 130 requires  that an  enterprise  (a) classify
items of other comprehensive  income by their nature in financial statements and
(b) display the accumulated balance of other comprehensive  income separately in
the equity section of the balance sheet for all periods presented. The Company's
comprehensive income (loss) does not differ from its reported net income (loss).

As an investment  company,  the Company must report changes in the fair value of
its investments  outside of its operating  income on its statement of operations
and reflect the  accumulated  appreciation  or depreciation in the fair value of
its  investments  as a separate  component of its  stockholders'  deficit.  This
treatment is similar to the treatment required by SFAS No. 130.

Mandatorily Redeemable Preferred Stock
--------------------------------------
The Company's  Series A Convertible  Preferred Stock (here and after referred to
as Series A Shares)  (Note 4) is  redeemable  at the  option of the  holder  and
therefore  falls  outside  of the scope of  Statement  on  Financial  Accounting
Standards  (SFAS) No. 150,  Accounting for Certain  Financial  Instruments  with
Characteristics of Both Liabilities and Equity. Accordingly, they are subject to
Rule 5-02 of Regulation S-X.

Pursuant  to Rule  5-02 of  Regulation  S-X,  the  Series A shares  (Note 4) are
considered  mandatorily  redeemable and as such is presented in the accompanying
balance sheet outside of stockholders'  deficit.  The initial carrying amount of
these shares was  recorded at its fair value at the date of issuance,  which was
determined  on a per share basis to equal the value at which  these  shares were
redeemed in January 2006. In addition,  the carrying  value was increased by the
amount of accrued cumulative dividends at December 31, 2005.

Stock Based Incentive Program
-----------------------------
SFAS No. 123R,  Share-Based  Payment, a revision to SFAS No. 123, Accounting for
Stock-Based  Compensation  and  superseding  APB Opinion No. 25,  Accounting for
Stock  Issued  to  Employees,  establishes  standards  for  the  accounting  for
transactions  in which an entity  exchanges its equity  instruments for goods or
services,   including   obtaining  employee  services  in  share-based   payment
transactions.  SFAS No. 123R  applies to all awards  granted  after the required
effective date and to awards modified,  purchased,  or canceled after that date.
Adoption  is  effective  as of the  beginning  of the  first  interim  or annual
reporting  period that begins  after  December  15,  2005.  Management  does not
believe  the  adoption  of this  accounting  pronouncement  will have a material
impact on the Company's financial position or operating results.


Recent Accounting Pronouncements
--------------------------------
Through  December 31, 2005,  there were  several new  accounting  pronouncements
issued by the  Financial  Accounting  Standards  Board (FSAB) the most recent of
which was Statement on Financial Accounting Standards (SFAS) No. 154, Accounting
Changes and Error Corrections. Each of these pronouncements,  as applicable, has
been or will be adopted by the Company. Management does not believe the adoption
of any of these accounting pronouncements has had or will have a material impact
on the Company's financial position or operating results.

In December 2004, the FASB issued SFAS No. 123R,  Share Based Payment,  revising
SFAS  No.  123,  Accounting  for  Stock-Based   Compensation,   and  superseding
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees.   SFAS  No.  123R  establishes   standards  for  the  accounting  for
transactions  in which an  entity  exchanges  equity  instruments  for  goods or
services,   including   obtaining  employee  services  in  share-based   payment
transactions.  SFAS No. 123R  requires all  share-based  payments to  employees,
including grants of stock options, to be recognized in the financial  statements
based on their fair values. The pro forma disclosures previously permitted under
SFAS  No.  123  no  longer  will  be  an  alternative  to  financial   statement
recognition.  Adoption is effective as of the  beginning of the first interim or
annual reporting period that begins after December 15, 2005. Management does not
believe  the  adoption  of this  accounting  pronouncement  will have a material
impact on the Company's financial position or operating results.


                                    Page 60
<PAGE>

NOTE 2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (continued)
--------------------------------------------
In May 2005,  the FASB issued  Statement of Financial  Accounting  Standards No.
154, Accounting Changes and Error Corrections. SFAS No. 154 replaces APB Opinion
No. 20,  Accounting  Changes  and FASB No. 3,  Reporting  Accounting  Changes in
Interim  Financial  Statement.  SFAS 154 provides guidance on the accounting for
and  reporting of  accounting  changes and error  corrections.  It  establishes,
unless  impracticable,  retrospective  application  as the  required  method for
reporting  a  change  in  accounting  principle  in  the  absences  of  explicit
transition requirements specific to the newly adopted accounting principle. SFAS
154 also provides guidance for determining whether retrospective  application of
a change in  accounting  principle is  impracticable  and for reporting a change
when retrospective application is impracticable.  It also requires that a change
in method of  depreciating  or  amortizing a long-lived  non-financial  asset be
accounted for prospectively as a change in estimate, and correction of errors in
previously  issued financial  statements  should be termed a "restatement".  The
provisions  of  this  Statement  are  effective  for   accounting   changes  and
corrections of errors made in fiscal periods  beginning after December 15, 2005.
The  implementation of SFAS 154 is not expected to have a material impact on the
Company's financial statements.

In November  2005,  the FASB issued FASB Staff  Position (FSP) No. FAS 115-1 and
FAS 124-1, the meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments.  This FSP nullified certain requirements of Emerging Issues
Tasks  Force  03-1,  the  meaning  of  Other-Than-Temporary  Impairment  and Its
Application to Certain Investments, and references existing other than temporary
guidance. Furthermore, this FSP creates a three step process in determining when
an  investment  is considered  impaired,  whether that  impairment is other than
temporary,  and measurement of an impairment loss. The implementation of the FSP
No. FAS 115-1 and FAS 124-1 is not  expected  to have a  material  impact on the
Company's position or results of operations.



NOTE 3        STOCK ACQUISITION

On December 16, 2005,  the Company  entered into a stock  purchase  agreement to
acquire all issued and outstanding shares of the capital stock of ACL Consulting
Corporation (ACL), a Texas corporation majority owned by an officer and director
of the Company providing business  consulting  services to companies that desire
to go public.

The  purchase  price of the shares was  $1,593,000.  The  consideration  for the
acquisition  was  comprised  of three  components:  (1) $735,000 in cash paid at
closing, (2) $458,000 secured promissory note delivered at closing (Note 5), and
(3) 400,000 shares of Series A Convertible Preferred Stock of the Company with a
value at issuance of $400,000 (Note 4).

The stock purchase agreement contains a right to rescission,  whereby the seller
shall have the right to rescind the agreement and maintain 100% ownership of ACL
Consulting Corporation in the event the Company fails to do the following:

     (4)  Fails to make  any  required  payments  pursuant  to the  terms of the
          Secured Promissory Note (Note 5); or
     (5)  Fails to become registered under the 1940 Investment  Company Act as a
          business development company; or
     (6)  Fails to make  any  required  securities  filings  for a period  of 15
          months, beginning on the closing date of December 16, 2005.

At December 31, 2005,  the  Company's  carrying  value of its  investment in ACL
consisted of its original cost of  $1,593,000  less cash advances to the Company
by ACL of $1,277,271.


                                    Page 61
<PAGE>

NOTE 4        CAPITAL STRUCTURE DISCLOSURES


Common Stock
The Company is authorized to issue 200,000,000 shares of common stock with a par
value of $.001 and each  share  having one  voting  right  along with the voting
rights attached to the Series A Convertible Preferred Stock (see below).


Preferred Stock
In April 2001, the Company amended its articles of incorporation to increase the
number of preferred stock shares  authorized from 6,000,000 shares to 50,000,000
shares,  reduced  the par value of the  preferred  stock from $1.00 to $.001 and
eliminated its previous rights and preferences.

On October 18, 2001, in connection with the Company's  merger with SGI (Note 1),
the Company issued 1,000,000 convertible preferred stock shares. The shares were
convertible  into common stock in an amount such that,  when added to the common
shares already issued to SGI, SGI will own 70% of the  outstanding  common stock
shares of the Company.  No other  rights or  privileges  exist,  with respect to
these shares. These shares were cancelled on May 8, 2003.

On December  15, 2005,  the Company  amended its  articles of  incorporation  to
designate  400,000 shares of the 50,000,000 shares of preferred stock authorized
as Series A Convertible Preferred Stock with a par value of $.001 per share.

Series A Convertible Preferred Stock
On December 16, 2005,  in  connection  with the  acquisition  of ACL  Consulting
Corporation  (Note 3), the Company issued 400,000 shares of Series A Convertible
Preferred Stock (Series A Shares) (as noted above) with a par value of $.001 per
share. A 6% distribution per share is payable per annum, at the Company's fiscal
year end, on a cumulative  basis based upon the  specified  redemption  value of
each share of Series A Shares. If any dividend or other distribution is declared
on the common  stock,  each  holder of shares of Series A Stock on record on the
date of  declaration  shall be entitled to receive  the  equivalent  dividend or
other  distribution as if the shares had been converted into common stock at the
declaration  date.  All Series A Shares  have equal  voting  rights  with common
stock. The shares may be converted,  at any time, into shares of common stock as
specified by the "conversion ratio" that is in effect at the time of conversion.
The initial  "conversion ratio" for the entire class of Series A Shares is equal
to 12.5% of the total  outstanding  shares of common stock.  The Company has the
right, at any time, to call for mandatory redemption of all the shares of Series
A Shares at a set redemption price of $1.25 per share.

At December 31, 2005,  $1,315 was accrued as dividends  payable on the Company's
Series A Shares.

On January 24, 2006,  the Company  exercised its  redemption  right and redeemed
320,000 of the outstanding  400,000 shares at the redemption  price of $1.25 per
share,  totaling  $400,000 for which the officer  received a cash  payment.  The
remaining 80,000 shares were redeemed through the issuance of a $100,000 note to
the officer (Note 5).


NOTE 5        RELATED PARTY TRANSACTIONS

The  officers  and  directors  of the  Company are  involved  in other  business
activities  and  may,  in  the  future,   become   involved  in  other  business
opportunities  as they become  available.  The officers and directors may face a
conflict in selecting  between the Company and their other  business  interests.
The Company has not formulated a policy for the resolution of such conflicts.

During the period  December  16, 2005  through  December  31,  2005,  the period
January 1, 2005 through  December 15, 2005 and each of the years ended  December
31, 2004 and 2003,  directors/shareholders made non-interest bearing advances to
the Company totaling $0, $59,396, $33,100 and $24,299, respectively.  During the
period December 16, 2005 through December 31, 2005, $8,200 of these advances was
repaid  through the  issuance of common  stock.  At December  31, 2005 and 2004,
outstanding   advances   from   stockholders   totaled   $108,595  and  $57,399,
respectively.


                                    Page 62
<PAGE>
<TABLE>
<CAPTION>

NOTE 5        RELATED PARTY TRANSACTIONS (CONTINUED)

During the period  December  16, 2005  through  December 31, 2005 and the period
January 1, 2005 through  December 15, 2005,  the Company  received  funds in the
amount of $65,000 and  $35,000,  respectively,  from  Shocker  100 Index,  LP, a
limited partnership in which ACL owns a 42.9% limited partnership interest.  The
note is  unsecured  with an  interest  rate of 8% per  annum and is  payable  as
Shocker 100 Index,  LP may from time to time  designate in writing.  At December
31, 2005, accrued interest expense payable totaled $6,028.

On December 16, 2005, in  conjunction  with the stock purchase of ACL Consulting
Corporation,  the  Company  issued a secured  promissory  note in the  amount of
$458,000 to an officer of the Company. Quarterly payments of $114,500 are due on
the 1st day of the third month for a period of 360 days, beginning on January 1,
2006.  Interest on the note is 6% per annum and payable in full on the  maturity
date. In accordance with the stock purchase  agreement  entered into on December
16,  2005  (Note 3), the seller  shall  have the right to rescind  the  purchase
agreement and maintain 100% ownership of ACL Consulting Corporation in the event
the Company  fails to make any required  payments  pursuant to the terms of this
secured  promissory note. At December 31, 2005, accrued interest expense payable
totaled $1,144. On January 25, 2006, a payment of $458,000 plus accrued interest
of $2,931 was made to the officer to retire the note.

On December 16, 2005, in  conjunction  with the stock purchase of ACL Consulting
Corporation,  the  Company  indirectly  acquired a majority  owned  interest  in
Interim  Capital Corp (ICC),  the general  partner of Shocker 100 Index,  LP. At
December 31, 2005, ACL Consulting  Corporation's  interest  consists of a 72.35%
share of Interim  Capital  Corporation.  On December 31, 2005, a majority of the
limited  partners  removed ICC as general partner and appointed FGT Consultants,
Inc., a Texas corporation wholly owned by an officer of the Company,  as general
partner.

On January  24,  2006,  a $100,000  note was issued to an officer as part of the
Series  A  Convertible   Preferred  Stock  redemption  (Note  4).  The  note  is
non-interest  bearing until June 1, 2006, at which point  interest will commence
to accrue on the outstanding principal at a rate of 8% per annum.  Principal and
interest,  accrued  accordingly,  are payable on demand, and if not paid sooner,
all principal and interest accrued is due on December 1, 2006.


NOTE 6        PROVISION FOR INCOME TAXES

The Company  accounts for corporate income taxes in accordance with Statement of
Financial  Accounting Standards (SFAS) No. 109. Under SFAS No. 109, deferred tax
assets and liabilities are recognized for the estimated  future tax consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases. In addition,
future tax benefits,  such as those from net operating loss carry forwards,  are
recognized to the extent that  realization  of such benefits is more likely than
not.  Deferred tax assets and  liabilities  are measured using enacted tax rates
expected  to  apply  to  taxable  income  in the  years  which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that  includes the enactment  date.  At December 31, 2005,  the Company's
cost of its investments for federal income tax purposes is equal to its cost for
financial reporting purposes.

A reconciliation  of income tax expense at the statutory  federal rate of 34% to
income  tax  expense at the  Company's  effective  tax rate for the period  from
December  16,  2005 to December  31,  2005,  the period from  January 1, 2005 to
December 15, 2005, and for each of the years ended December 31, 2004 and 2003 is
as follows.

                                               Dec. 16, 2005       Jan. 1, 2005
                                             to Dec. 31, 2005    to Dec. 15, 2005       12/31/2004          12/31/2003
                                             ----------------    ----------------    ----------------    ----------------
<S>                                          <C>                 <C>                 <C>                 <C>
Tax expense (benefit) computed at
  statutory rate                             $           (544)   $         28,028    $        (24,797)   $        (29,769)
Increase (decrease) in valuation allowance                544             (28,028)             24,797              29,769
                                             ----------------    ----------------    ----------------    ----------------

Deferred Tax Asset                           $           --      $           --      $           --      $           --
                                             ================    ================    ================    ================
</TABLE>

As of December 31, 2005, the Company has approximately $1,015,000 of regular net
operating  losses to offset future  federal income tax, which expire through the
year 2025.


                                    Page 63
<PAGE>

NOTE 6        PROVISION FOR INCOME TAXES (CONTINUED)

At December 31, 2005 and 2004,  significant components of the Company's deferred
tax assets (benefits) are summarized below.

                                             12/31/2005    12/31/2004
                                             ----------    ----------

     Deferred Tax Assets:
       Net Operating Loss Carry Forward      $ (345,378)    $(372,862)
       Less Valuation Allowance                 345,378       372,862
                                             ----------    ----------

                                             ----------    ----------

     Deferred Tax Liabilities                      --            --
                                             ----------    ----------

     Net Deferred Tax Assets                 $     --      $     --
                                             ==========    ==========


NOTE 7        STOCK OPTION PLAN

The  Company's  stock  option plan (the 1997 Stock  Option  Plan) allows for the
issuance  of  incentive  and   nonqualified   stock  options  to  employees  and
consultants  of the Company.  Options  granted  under the Plan are generally for
periods  not to exceed ten years and  generally  must be at prices not less than
100% and 85%, for incentive and nonqualified stock options, respectively, of the
estimated  fair  value of the  stock on the date of grant as  determined  by the
Board of Directors.  Options granted to shareholders who own greater than 10% of
the  outstanding  stock are established at the estimated fair value of the stock
on the date of grant.  Stock  options  granted  by the  Company  to  others  are
primarily for legal and investment banking services.

In  connection  with the  Company's  acquisition  of SGI (Note 1),  the  Company
renegotiated  the  stock  options   previously  granted  to  former  members  of
management  (Note 8).  These  options  for  8,679,039  common  stock  shares are
considered a new grant pursuant to the pronouncement SFAS No. 123R,  Share-Based
Payment  (Note  2).  These  options  are fully  vested,  do not  expire  and are
exercisable  at $.01 per share,  the closing bid price of the  Company's  common
stock on the date of grant.  Accordingly,  no compensation was charged to income
using the intrinsic value method of accounting.

On February 24, 2004,  the Company  established  the 2004 Stock Plan (the Plan).
The plan registers, via an S8 registration statement, up to 18,000,000 shares of
common stock to be issued to qualified recipients.  Eligible participants in the
Plan shall be such key employees, non-employee directors, and consultants of the
Company  and its  subsidiaries,  whether or not  members  of the  Board,  as the
Committee,  in its  sole  discretion,  may  designate  from  time to  time.  The
Committee's  designation  of a  participant  in any year shall not  require  the
Committee  to  designate  such person to receive  awards in any other year.  The
designation  of a participant  to receive an award under one portion of the Plan
does not require the Committee to include such participant  under other portions
of the Plan. The Committee  shall consider such factors as it deems pertinent in
selecting  participants  and in  determining  the  types  and  amounts  of their
respective awards.

During the year ended December 31, 2005, the Company issued 10,000,000 shares of
common stock, under the 2004 Stock Plan, as payment for $40,000 of legal and
consulting services at a price of $.004 per share, reducing the shares of common
stock available for future awards under the stock plan to 8,000,000 shares at
December 31, 2005.

Separate pro forma net income (loss) and income (loss) per share amounts are not
presented  because  there  are no  differences  in the  amounts  that  would  be
presented  compared  to actual  net income  (loss)  and income  (loss) per share
amounts reported in the accompanying financial statements.


                                    Page 64
<PAGE>

NOTE 8        COMMITMENTS AND CONTINGENCIES


Employment Agreements
On July 1, 2000,  the Company  entered  into  employment  agreements  with three
former members of executive  management.  The agreements,  which expired through
June 30, 2004, provided for annual compensation  totaling $306,000 increasing to
$534,000 after the Company raised $2 million in equity funding. In addition, two
of the agreements provided signing bonuses totaling $250,000,  payable after the
above  funding  has been  raised.  The Company had the option to pay half of the
amount  payable in common stock shares of the Company valued at the bid price of
the stock as of the effective date of the agreement. In the case of termination,
the agreements provided for a 12-month salary severance package,  reduced by 50%
if the  termination is for cause.  The agreements also provided stock options to
purchase up to 17,508,078 common shares at $.01 per share based on various goals
as these goals are defined in the agreements and 1,200,000 common shares at $.01
per share, which vest over three years.

In addition,  this  employment  agreement  provided  qualified stock options for
500,000 of the Company's  common stock at an exercise  price of $ 0.10 per share
(post  merger).  These options vest over the  three-year  term of the employment
agreement  and  automatically  expire three years from the date they vest.  Upon
termination,  all vested options must be exercised within 45 days or they expire
and all  non-vested  options  will be  cancelled  subject to the approval of the
Photonics' shareholders.


In connection with the Company's  merger with SGI (Note 1), the above agreements
were terminated and the Company is no longer  obligated under these or any other
employment  agreements.  In this process,  stock  options to purchase  8,679,039
common  stock  shares  were  fully  vested to the  former  executive  management
members.  The  options are  exercisable  at a price of $.01 per share and do not
expire (Note 7).

There  are  no  current  employment  agreements  with  any of  the  officers  or
directors.  All previous  agreements have been cancelled through the issuance of
notes payable and stock options.

Leases
The Company was obligated under a non-cancelable  operating  sublease  agreement
for its office  facilities,  effective May 1, 2000 and which expired on December
31, 2001.  The  agreement  provided for a monthly  rental  payment of $5,232 and
there was no option for renewal.  However,  in June 2001, the Company was unable
to pay its  monthly  rent and the space was taken back along with the  Company's
property  and  equipment.  In  addition,  a  three-month  security  deposit  was
forfeited.  Although the Company is no longer  obligated  under this  agreement,
there is no assurance the sublessor will not initiate legal action in the future
to recover approximately $30,000 of unpaid rent.

The Company  currently does not maintain office  facilities and is not obligated
under any non-cancelable obligations.

Legal Matters - Photonics Corporation
The Company is subject to legal proceedings that arise in the ordinary course of
business.  Primarily,  these  lawsuits  were the  result of  defaulted  accounts
payable of Photonics prior to the merger with REPipeline.com, Inc.

     1.   Abstract  of  judgment  dated  October  12,  1999;  Plaintiff  Insight
          Electronics.   Defendant  Data  Technologies  Corporation.  Amount  of
          judgment:  $110,252.  In  August  2005,  the  Company  entered  into a
          settlement agreement with Insight Electronics whereby the Company paid
          $30,000 to settle the debt.

     2.   Default Judgment February 17, 2000, Plaintiff Danka Funding Company v.
          Defendant  Photonics,  Docket  No.  L-8482-99,  Superior  Court of New
          Jersey  Law   Division,   Bergen  County  for  $40,474  with  proposed
          settlement offer by Danka of $ 30,356 as of March 22, 2000.  (lease of
          Kodak 85 Copier)  Notice of Judgment  dated  November 29, 2000,  Santa
          Clara  County  Superior  Court -  Central  District,  Plaintiff  Danka
          Funding Company,  LLC v. Defendant  Photonics  Corporation.  Amount of
          judgment  $  41,342.  In  August  2005,  the  Company  entered  into a
          settlement  agreement with Danka Funding whereby the Company paid $250
          to settle the debt.


                                    Page 65
<PAGE>

NOTE 8        COMMITMENTS AND CONTINGENCIES (CONTINUED)


Legal Matters - Photonics Corporation (continued)
     3.   Litigation  Superior Court,  Contra Costa County,  CA., Plaintiff L.A.
          Commercial Group, Inc (Bay Alarm) Defendant Photonics Corporation, for
          the amount of $8,666.  During the third quarter of 2005, every attempt
          to contact the debtor for  settlement  was  pursued,  but could not be
          located. The debt was written off in the third quarter.

     4.   Default Judgment, Dallas County, Texas, Clerk of the County Courts Law
          No. 5, Bowne of Dallas,  LP v.  Photonics  Corporation,  et al,  cause
          number  cc-02-14411-e,  for $28,641, in July 2003. In August 2005, the
          Company  entered  into a  settlement  agreement  with  Bowne of Dallas
          whereby the Company paid $17,500 to settle the debt.

In the third  quarter of 2005,  the Company  settled  additional  non-litigation
debts  totaling  $34,495  for $646.  During the period  from  January 1, 2005 to
December 15, 2005,  the Company  recognized  $174,133 in income from the gain on
the above extinguishment/settlement of debt (Note 9).

In addition,  Photonics  Corporation  has the following  liens filed against its
assets:

       1.   Type of lien:           Personal Property Tax
            Lien holder:            State of California/ Santa Clara County
            Amount of lien:         $5,445
            Date of lien:           November 6, 1998
            Debtor:                 Photonics Corporation

       2    Type of lien:           Personal Property Tax
            Lien holder:            State of California/ Santa Clara County
            Amount of lien:         $6,120
            Date of lien:           November 5, 1999
            Debtor:                 Photonics Corporation

In June 2004,  Tom Bailey made various  verbal  threats to instigate  litigation
against the Company and its current and former  management to be reimbursed  for
the legal fees he incurred while  defending  himself against the Fonteno lawsuit
(see below),  along with other claims of harm that Mr. Bailey may have suffered.
Although  no formal  action or  complaint  has been  filed,  current  management
believes  there is a possibility,  although the Company's  legal counsel has not
fully  reviewed  Mr.  Bailey's  employment  contract  to offer an opinion on the
potential exposure,  the Company could be liable for up to $30,000 of legal fees
Mr. Bailey incurred for his defense.

New management of Photonics is not currently aware of any additional  pending or
threatened legal actions,  but believes there is a distinct  possibility of such
actions.  Management  is not able to  quantify  such  actions in relation to the
financial  statements  represented  herein an accordingly,  no loss accruals are
provided for these contingencies in the accompanying financial statements.

LEGAL PROCEEDINGS - REPIPELINE.COM, INC., which could affect Photonics
Around  June  2000,   REPipeline.com,   Inc.  (Texas)  acquired  the  assets  of
RealEstate4Sale.com  (RE4S).  One of the assets REPipeline did not acquire was a
claim by RE4S against Doug Fonteno. Prior to his displacement from RE4S on April
1, 2000,  Mr.  Fonteno made  numerous non interest  bearing  advances to him and
several entities controlled by him totaling approximately $183,906.  Previously,
on April 28, 2000,  the Board of Directors of  RealEstate4Sale.com  had voted to
expunge  all shares of RE4S owned by Mr.  Fonteno,  his  family  members  and/or
affiliated companies,  which were issued for inadequate consideration and lacked
proper  approval by the Board of Directors of RE4S.  These shares were cancelled
and are not held in treasury.


                                    Page 66
<PAGE>

NOTE 8        COMMITMENTS AND CONTINGENCIES (CONTINUED)

LEGAL PROCEEDINGS-REPIPELINE.COM, INC., which could affect Photonics (continued)
The lawsuit against Mr. Fonteno was dropped by the Board in the third quarter of
2001 when the Company  was unable to  continue to pay for legal fees  associated
with the lawsuit.  REPipeline.com's  management  does not believe the outcome of
its  lawsuit  with RE4S  founder  will have an adverse  effect on the  Company's
financial  position,  operating  results or cash flows. On October 18, 2001, Mr.
Fonteno filed a lawsuit against REPipeline.com,  Photonics,  and former officers
and directors of the Company,  including Tom Bailey and Chip Langston,  claiming
various  charges and claims of wrongdoing.  In June of 2004, Tom Bailey and Chip
Langston  informed  current  management that all parties in the suit have agreed
upon a  settlement.  Since the Company was never  formally  served the  lawsuit,
current  management does not know what the settlement  entails and cannot assess
its potential exposure.

There is a lien from the State of Texas against REPipeline.com,  Inc. for unpaid
wages to a former employee. The amount of the lien is for $14,344.

On October 13, 2001,  Today's Staffing,  Inc. sued  REPipeline.com in the Second
Court of Dallas County for unpaid fees  associated with  telemarketing  services
provided to the Company.  Management  has not  responded  and believes a default
judgment  will be  entered  against  the  Company.  The  lawsuit  is for  $7,096
including $1,774 in legal fees.

Management  is not able to quantify  such risk or exposure to  additional  legal
actions in relation to the financial  statements  represented herein.  There are
various other threatened or perceived lawsuits,  but none have acted against the
Company.


NOTE 9        EXTINGUISHMENT OF DEBT

The following table summarizes the gain from  extinguishment of debt recorded by
the Company during the period from January 1, 2005 through December 15, 2005:


                                                                  Gain on
                            Balance Before   Balance After    Extinguishment
                              Settlement       Settlement         of Debt
                            --------------   --------------   --------------

Insight Electronics         $      110,252   $       30,000   $       80,252
Danka Funding Company               40,474              250           40,224
LA Commercial Group, Inc             8,666                0            8,666
Bowne of Dallas, LP                 28,641           17,500           11,141

Additional non-litigation
  debts                             34,496              646           33,850
                            --------------   --------------   --------------

Total                       $      222,529   $       48,396   $      174,133
                            ==============   ==============   ==============


NOTE 10       EMPLOYEE BENEFIT PLANS

The Company adopted a Shared Savings Plan (the SSP) covering  substantially  all
of its  employees.  The SSP  allows  employees  to defer from 2% to 12% of their
compensation  to the  maximum  amount  permitted  by law.  Employee  and Company
contributions  are  considered tax deferred under Section 401(k) of the Internal
Revenue  Code.  Under the terms of the SSP,  the  Company can  contribute,  on a
quarterly basis,  shares of its common stock to each employee's account equal in
value to 40% of the employee's  contributions,  limited, however to $2,000 or 6%
of   compensation   per  calendar   year,   whichever  is  less.  The  Company's
contributions vest at the rate of 25% for each full year of service, as defined,
but become 100% vested upon normal retirement,  disability or death. Neither the
Company nor any of its employees have made any contributions to this plan.


                                    Page 67
<PAGE>

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

ITEM 9A CONTROLS AND PROCEDURES

Disclosure  controls and procedures are controls and other  procedures  that are
designed  to ensure  that  information  required  to be  disclosed  by us in the
reports that we file or submit  under the  Exchange Act is recorded,  processed,
summarized and reported, within the time periods specified in the Securities and
Exchange  Commission's  rules and  forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and  communicated  to our management,  including our
principal  executive  and  financial  officer,  as  appropriate  to allow timely
decisions regarding required disclosure.

Evaluation of disclosure and controls and procedures

Based on their  evaluation of the Company's  disclosure  controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e)  under the Securities  Exchange Act
of 1934) as of the end of the  period  covered  by this  annual  report  on Form
10-KSB the Company's  chief  executive  officer has concluded that the Company's
disclosure  controls  and  procedures  are  designed to ensure that  information
required to be  disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods  specified in the SEC's rules and forms and are operating in an
effective manner.

Changes in internal controls over financial reporting

There  were  no  changes  in the  Company's  internal  controls  over  financial
reporting or in other factors that have materially  affected,  or are reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting as of December 31, 2005.  Subsequent  to December 31, 2005, we adopted
new internal controls more consistent with the operation of a BDC.

ITEM 9B OTHER INFORMATION

None.

                                    PART III

Item 10 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table includes the names,  ages and positions of our directors and
executive  officers as of December  31, 2005.  A summary of the  background  and
experience of each of these individuals immediately follows the table.


        NAME           AGE               POSITION                 OFFICER OR
                                                                DIRECTOR SINCE
--------------------------------------------------------------------------------
Bryce Knight           22     President, CEO, Director                2005


                                    Page 68
<PAGE>

--------------------------------------------------------------------------------

Mark Lindberg          38     Chief  Financial  Officer,              2002
                              Secretary, Director

Paul Johnson           57     Director                                2005

Terry Washburn         52     Director                                2005


Bryce Knight,  President,  Chief Executive Officer, and Director, age 22, serves
as  President,  CEO and  Director  of the  Company.  Mr.  Knight  also serves as
Vice-President  and Chief Financial  Officer of Photonics  Corporation.  (OTCBB:
GBVS).  He is the  President  of  Knight  Consulting  Corporation,  a  corporate
strategy and financial  consulting  firm, as well.  Previously Mr. Knight worked
with General Electric as a financial  analyst for its consumer products division
and with Robert Bosch Tool Corporation in the marketing  department.  Mr. Knight
graduated with honors from Bellarmine University with a Business  Administration
degree and a Master's of Business Administration.

Mark Lindberg, Chief Financial Officer, Secretary and Director, age 38, has been
an Officer,  Director, and a stockholder of Photonics Corporation since November
2002. He serves as Chief Financial Officer,  Secretary, and as a director of the
company. Since 1996 he has served as an officer and director of several publicly
traded  companies,  many in the start-up or development  phase.  Mr. Lindberg is
also President,  Chief  Financial  Officer and Director of Interim Capital Corp.
Between 1991 and 1996, he was an executive  with National  Health Care Discount,
Inc.,  in Dallas,  a direct  marketer of health care and wellness  services.  An
accounting  graduate of Baker  University,  Baldwin City,  Kansas,  he began his
business  career  as a tax  specialist  with the  worldwide  accounting  firm of
Deloitte and Touche.

Paul  Johnson,  Director,  age 57,  serves as a  Director  for the  Company.  He
specializes in designing and directing the  implementation of new and innovative
business  strategies  and in  recruiting  the best  talent to  develop  and grow
businesses.  Over the past 20 years his companies have created major innovations
in rapid business development  strategies,  knowledge  management,  and software
interface design.

Mr. Johnson is President of Sniffex,  Inc. and is responsible  for the strategic
planning and business  development for the Company. In addition,  he sits on the
Board of Directors of LifeStyle Innovations (OTBC: LFSI), USN Corporation (OTBC:
USNR), and serves as an executive  consultant to several developing companies in
the Dallas/Ft. Worth, TX area. Mr. Johnson is an active participant in strategic
planning and business  development in each of these companies.  Over the past 15
years he has founded seven  technology-related  companies,  the largest of which
was Multimedia  Learning,  Inc.  (ranked 154th on the "Inc. 500" in 1996).  From
1991-1998, Mr. Johnson served as CEO of Multimedia Learning, Inc. Mr. Johnson is
a graduate of City College of New York and is a veteran of the Vietnam war.

Dr. Terry Washburn,  Director,  age 52, serves as Director for the Company.  Dr.
Washburn is also the Audit Committee  Financial Expert for the company and he is
independent.  He has also been a Director  of Idea Sports  Entertainment  Group,
Inc. (OTCBB: ISPO) since May 2001, serving as Chief Executive Officer from April
2001 to August 2001. Dr. Washburn is the President of Eurovest,  Inc., a private
venture capital firm, which  specializes in private placement of capital as well
as providing consulting services in strategic planning, business development and


                                    Page 69
<PAGE>
<TABLE>
<CAPTION>

organizational  management.  He is  also  the  Chief  Executive  Officer  of USN
Corporation,   formerly  Premier  Concepts,  Inc.,  a  company  specializing  in
marketing and retailing of high-end  faux  jewelry.  Dr.  Washburn is also Chief
Executive  Officer of SGD Holdings,  Ltd., a wholesale  jewelry  operation.  Dr.
Washburn  earned a Bachelor of Business  Administration  from the  University of
Oklahoma,  a Master  of  Divinity  from  the  Southwestern  Baptist  Theological
Seminary  in  Ft.  Worth,  Texas  and a  Doctor  of  Ministry  from  the  Fuller
Theological  Seminary in Pasadena,  California.  Dr. Washburn also serves on the
Board of Directors of SGD Holdings, Ltd. and USN Corporation.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section  16(a) of the Exchange Act  requires  our  officers and  directors,  and
persons who own more than 10% of a registered class of our equity securities, to
file reports of ownership  and change in ownership  with the SEC. Our  officers,
directors and greater than 10%  stockholders  are required by SEC regulations to
furnish us with copies of all Section  16(a)  forms they file.  We believe  that
from  January  1, 2005  through  December  31,  2005,  the  filing  requirements
applicable to our officers,  directors  and greater than 10%  stockholders  were
timely met. During the period from January 2005 to December 2005 no such filings
were  required.  In 2006,  the Company  intends to aid and assist its  officers,
directors and greater than 10% stockholders to meet timely filing deadlines.

CODE OF ETHICS

Photonics  Corporation  has  adopted  a code  of  ethics  for its  officers  and
directors. We will provide to any person without charge, upon written request to
our above address, a copy of such code of ethics.

AUDIT COMMITTEE

On March 6, 2006 the Company  formerly  chartered an audit  committee to provide
guidance and direction in matters  relating to the accounting of the Corporation
and  review and  preparation  of  independent  accounting  statements  and other
matters  relating to financial  accounting  all for the best  governance  of the
Corporation.

The Audit  Committee  is  comprised  of two  members,  Terry  Washburn  and Paul
Johnson, both of whom are independent  directors of the Company.  Terry Washburn
serves as the Audit Committee Financial Expert.

ITEM 11 EXECUTIVE COMPENSATION

The following  table sets forth the cash and other  compensation  we paid during
the last three fiscal years to our chief executive officer,  president and other
individuals who served as executive  officers and whose total  compensation  was
$100,000 or more.

--------------------------------------------------------------------------------------------------------------------
                                                                                                    Long Term
                                                              Annual Compensation                 Compensation
--------------------------------------------------------------------------------------------------------------------
<S>                                       <C>     <C>         <C>          <C>                  <C>
                    (a)                   (b)        (c)         (d)              (e)                  (f)
--------------------------------------------------------------------------------------------------------------------
        Name and Principal Position       Year    Salary ($)  Bonus ($)      Other Annual       Restricted Stock
                                                                           Compensation ($)       Award(s) ($)
--------------------------------------------------------------------------------------------------------------------


                                    Page 70
<PAGE>

--------------------------------------------------------------------------------------------------------------------
Bryce Knight                              2005        0           0                0                    0
President and Director                    2004        -           -                -                    -
                                          2003        -           -                -                    -
--------------------------------------------------------------------------------------------------------------------
Mark Lindberg                             2005        0           0                0                    0
Chief Financial Officer,                  2004        0           0                0                    0
Secretary, Director                       2003        0           0                0                    0
--------------------------------------------------------------------------------------------------------------------
</TABLE>

EMPLOYMENT AGREEMENTS

The Company does not have any current  employment  agreements  with its officers
and directors. The company intends to pay its Executives and Directors salaries,
wages,  or  fees  commensurate   with  experience  and  industry   standards  in
relationship to the success of the company.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth,  as of December 31, 2005,  certain  information
concerning the beneficial ownership of each class of our voting stock held by:

     -    each  beneficial  owner of 5% or more of our  voting  stock,  based on
          reports filed with the SEC and certain other information;

     -    each of our directors; - each of our executive officers; and

     -    all of our executive officers and directors as a group.

NAME AND ADDRESS (1)     COMMON (2)   % COMMON   PREFERRED   % PREFERRED

Mark Lindberg             5,000,000     4.19        --            --
OTC Support, Inc.        10,751,166     9.01

Officers and Directors
as a group               5,000,000      4.19%       --            --

     (1)  The address of each officer and  director is 520 South Fourth  Avenue,
          Suite 400, Louisville, Kentucky 40202-2577
     (2)  Unless otherwise  indicated,  we believe that all persons named in the
          table have sole voting and investment power with respect to all shares
          of common stock  beneficially  owned by them. A person is deemed to be
          the  beneficial  owner of  securities  which may be  acquired  by such
          person within 60 days from the date on which  beneficial  ownership is
          to be determined upon the exercise of options, warrants or convertible
          securities. Figures are as of December 31, 2005.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  officers  and  directors  of the  Company are  involved  in other  business
activities  and  may,  in  the  future,   become   involved  in  other  business
opportunities  as they become  available.  The officers and directors may face a
conflict in selecting  between the Company and their other  business  interests.
The Company has not formulated a policy for the resolution of such conflicts.

During the period  December  16, 2005  through  December  31,  2005,  the period
January 1, 2005 through  December 15, 2005 and each of the years ended  December
31, 2004 and 2003,  Saguaro  Holdings  Corp.  and BBX UIT,  shareholders  of the
Company, made non-interest bearing advances to the Company totaling $0, $59,396,


                                    Page 71
<PAGE>

$33,100 and $24,299,  respectively.  During the period December 16, 2005 through
December 31, 2005,  $8,200 of these  advances was repaid through the issuance of
common  stock.  At  December  31,  2005  and  2004,  outstanding  advances  from
stockholders totaled $108,595 and $57,399, respectively.

During the period  December  16, 2005  through  December 31, 2005 and the period
January 1, 2005 through  December 15, 2005,  the Company  received  funds in the
amount of $65,000 and  $35,000,  respectively,  from  Shocker  100 Index,  LP, a
limited partnership in which ACL owns a 42.9% limited partnership interest.  The
note is  unsecured  with an  interest  rate of 8% per  annum and is  payable  as
Shocker 100 Index,  LP may from time to time  designate in writing.  At December
31, 2005, accrued interest expense payable totaled $6,028.

On December 16, 2005, in  conjunction  with the stock purchase of ACL Consulting
Corporation,  the  Company  issued a secured  promissory  note in the  amount of
$458,000 to Mark  Lindberg,  an officer and director of the  Company.  Quarterly
payments of  $114,500  are due on the 1st day of the third month for a period of
360 days, beginning on January 1, 2006. Interest on the note is 6% per annum and
payable in full on the maturity  date.  In  accordance  with the stock  purchase
agreement  entered into on December 16, 2005 (Note 3), Mr.  Lindberg  shall have
the right to rescind the purchase  agreement and maintain 100%  ownership of ACL
Consulting  Corporation  in the event  the  Company  fails to make any  required
payments pursuant to the terms of this secured  promissory note. At December 31,
2005,  accrued interest  expense payable totaled $1,144.  On January 25, 2006, a
payment of $458,000  plus accrued  interest of $2,931 was made to the officer to
retire the note.

On December 16, 2005, in  conjunction  with the stock purchase of ACL Consulting
Corporation,  the  Company  indirectly  acquired a majority  owned  interest  in
Interim  Capital Corp (ICC),  the general  partner of Shocker 100 Index,  LP. At
December 31, 2005, ACL Consulting  Corporation's  interest  consists of a 72.35%
share of Interim  Capital  Corporation.  On December 31, 2005, a majority of the
limited  partners  removed ICC as general partner and appointed FGT Consultants,
Inc., a Texas corporation wholly owned by an officer of the Company,  as general
partner.

On January 24, 2006, a $100,000 note was issued to Mark Lindberg, an officer and
director as part of the Series A Convertible  Preferred Stock  redemption  (Note
4). The note is non-interest bearing until June 1, 2006, at which point interest
will commence to accrue on the outstanding  principal at a rate of 8% per annum.
Principal and interest,  accrued accordingly,  are payable on demand, and if not
paid sooner, all principal and interest accrued is due on December 1, 2006.


ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. The aggregate fees billed for professional  services rendered by our
current principal  accountants for the audit of our annual financial  statements
and review of our quarterly financial statements were $45,833 and $9,390 for the
years ended December 31, 2005 and 2004, respectively.

Audit-Related Fees: $45,833
Tax Fees:           $ 3,500
All Other Fees:     $     0


                                    Page 72
<PAGE>

Our Audit Committee was formerly  established on March 6, 2006 and is developing
its  pre-approval  policies and  procedures.  The above fees and  services  were
approved by our Board of Directors.


                                     PART IV

ITEM 15 EXHIBITS AND REPORTS ON FORM 8K

a)   31.1 Certificate of Principal  Executive Officer required by Rule 13a-14(a)
          or Rule 15d-14(a) of the  Securities  Exchange Act of 1934, as adopted
          pursuant  to  Section  302 of the  Sarbanes-Oxley  Act of 2002  (filed
          herewith).

     31.2 Certificate of Principal  Financial Officer required by Rule 13a-14(a)
          or Rule 15d-14(a) of the  Securities  Exchange Act of 1934, as adopted
          pursuant  to  Section  302 of the  Sarbanes-Oxley  Act of 2002  (filed
          herewith).

     32.1 Certificate of Chief Executive  Officer pursuant to 18 U.S.C.  Section
          1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of
          2002 (filed herewith).

     32.2 Certificate of Chief Financial Officer pursuant to 18 U. S. C. Section
          1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of
          2002 (filed herewith).

b)   14   Photonics Corporation Code of Ethics



SIGNATURE

          Pursuant to the  requirements  of Section 3 or 15(d) of the Securities
          Exchange  Act of 1934,  the  Company has duly caused this report to be
          signed on its behalf By the undersigned, thereunto duly authorized.

PHOTONICS CORPORATION

DATE:   March 29, 2006

BY: /s/ Bryce Knight
   ------------------------------------------------
   Bryce Knight
   President, Chief Executive Officer, and Director


                                    Page 73
<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the  following  persons on behalf of the  Registrant in
the capacities and on the dates indicated.

DATE                        TITLE (CAPACITY)                     SIGNATURE

3/29/2006     President, Chief Executive Officer, Director   /x/ Bryce Knight
                                                             ------------------
                                                             Bryce Knight

3/29/2006     Chief Financial Officer and Director           /x/ Mark Lindberg
                                                             ------------------
                                                             Mark Lindberg

3/29/2006     Director                                       /x/ Paul Johnson
                                                             ------------------
                                                             Paul Johnson

3/29/2006     Director                                       /x/ Terry Washburn
                                                             ------------------
                                                             Terry Washburn