vt10qsb

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended: June 30, 2006

[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from: _______ to _______

Commission file number: 000-27277

VitalTrust Business Development Corporation

(Exact name of small business issuer as specified in its charter)

NEVADA	88-0503197
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer I.D. Number)

7029 Pelican Drive

Tampa, FL 33634

(Address of principal executive offices)

(813) 785-2000

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceeding 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 whether the registrant is a large accelerated, 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).

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 the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

Class	Outstanding at July, 31, 2006
Common Stock, $0.001 par value	41,027,209

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TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Footnotes to Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	36

PART II	OTHER INFORMATION	37

Item1.	Legal Proceedings	37

Item1a.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Submission of Matters to a Vote of Security Holders	38

Item 5.	Other Information	38

Item 6.	Exhibits	38

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Item 1. Financial Information.

VITALTRUST BUSINESS DEVELOPMENT CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2006 and DECEMBER 31, 2005

ASSETS		UNAUDITED			AUDITED
		6/30/2006			12/31/2005
CURRENT ASSETS
Cash	$	57,112		$	144
Prepaid expenses		11,500			881
Note receivable, related party		151,400			-
Other current assets		56,600			-
TOTAL CURRENT ASSETS		276,612			1,025

FIXED ASSETS, NET		4,876			-

INVESTMENT IN RELATED MANAGEMENT COMPANY, AT FAIR VALUE		41,567			450,000

PORTFOLIO INVESTMENTS, AT FAIR VALUE		4,041,250			2,756,250

TOTAL ASSETS	$	4,364,305		$	3,207,275


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	104,102		$	132,028
Due to related parties		160,463			82,121
Convertible notes payable		227,178			194,747
TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES		491,743			408,896

COMMITMENTS AND CONTINGENCIES		-			-

STOCKHOLDERS' EQUITY
Convertible Preferred Stock Class A, $.001 par value, 10,000,000 shares
authorized; None issued and outstanding at June 30, 2006 and
December 31, 2005 and 2004, respectively		-			-
Preferred Stock Class B, $.001 par value, 10,000,000 shares authorized;
None issued and outstanding at June 30, 2006 and December 31, 2005,
respectively		-			-
Preferred Stock Class C, $.001 par value, 10,000,000 shares authorized;
None issued and outstanding at June 30, 2006 and December 31, 2005,
respectively		-			-
Common stock, $.001 par value, 50,000,000 and 2,400,000,000 shares authorized
at June 30, 2006 and December 31, 2005, respectively;
41,447,209 shares issued and 41,027,209 shares outstanding at June 30, 2006;
18,929,709 shares issued and 18,509,709 shares outstanding at December 31, 2005		41,447			18,930
Additional paid-in capital		10,954,247			9,086,264
Share reserve account		(420	)		(420	)
Accumulated deficit		(7,122,712	)		(6,306,395	)
TOTAL STOCKHOLDERS' EQUITY		3,872,562			2,798,379

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,364,305		$	3,207,275

See accompanying notes to the consolidated financial statements

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VITALTRUST BUSINESS DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005

	UNAUDITED			AUDITED
	For the Three			For the Three
	Months Ended			Months Ended
	6/30/2006			6/30/2005

REVENUES	$	-		$	-

OPERATING EXPENSES
Depreciation		168			-
Professional fees		82,571			42,736
Professional fees- related party		98,600			375,000
General and administrative		23,862			4,629
Total Operating Expenses		205,201			422,365

OPERATING LOSS		(205,201	)		(422,365	)

NET UNREALIZED DEPRECIATION
ON INVESTMENTS		(8,313	)		(13,910	)

OTHER EXPENSE
Amortization of beneficial conversion feature of convertible debt					(73,613	)
Interest Expense		(4,484	)		(5	)
Total Other Expenses		(4,484	)		(73,618	)

LOSS BEFORE INCOME TAXES		(217,998	)		(509,893	)

INCOME TAX EXPENSE		-			-

NET LOSS	$	(217,998	)	$	(509,893	)

DEEMED DIVIDENDS ON PREFERRED STOCK		-			(130,000	)

NET LOSS AVAILABLE TO COMMON STOCKHOLDERS	$	(217,998	)	$	(639,893	)

NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
PER SHARE BASIC AND DILUTED		(0.01	)		(0.41	)

WEIGHTED AVERAGE COMMON SHARES
BASIC AND DILUTED		41,707,209			1,572,893

See accompanying notes to the consolidated financial statements

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VITALTRUST BUSINESS DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005

				UNAUDITED
	UNAUDITED			RESTATED
	For the Six			For the Six
	Months Ended			Months Ended
	6/30/2006			6/30/2005

REVENUES	$	40,000		$	-

OPERATING EXPENSES
Depreciation		168			-
Professional fees		139,676			112,374
Professional fees- related party		208,367			895,000
General and administrative		57,955			6,706
Total Operating Expenses		406,166			1,014,080

OPERATING LOSS		(366,166	)		(1,014,080	)

NET UNREALIZED DEPRECIATION
ON INVESTMENTS		(427,600	)		(1,392,144	)

OTHER INCOME (EXPENSE)
Gain on sale of portfolio investments		10,000
Amortization of beneficial conversion feature
of convertible debt		(23,552	)		(84,445	)
Interest Expense		(8,999	)		(4,106	)
Total Other Income (Expense)		(22,551	)		(88,552	)

LOSS BEFORE INCOME TAXES		(816,317	)		(2,494,775	)

INCOME TAX EXPENSE		-			-

NET LOSS	$	(816,317	)	$	(2,494,775	)

DEEMED DIVIDENDS ON PREFERRED STOCK		-			(250,000	)

NET LOSS AVAILABLE TO COMMON STOCKHOLDERS	$	(816,317	)	$	(2,744,775	)

NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
PER SHARE BASIC AND DILUTED		(0.03	)		(2.32	)

WEIGHTED AVERAGE COMMON SHARES
BASIC AND DILUTED		31,251,339			1,183,040

See accompanying notes to the consolidated financial statements

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VITALTRUST BUSINESS DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)

									Additional Paid								Total
	Preferred Stock				Common Stock				in		Share Reserve			Accumulated			Stockholders
	Shares		Amount		Shares		Amount		Capital		Account			(Deficit)			Equity

Balance at
December 31, 2005		-	$	-		18,929,709	$	18,930	$	9,086,264	$	(420	)	$	(6,306,395	)	$	2,798,379

Stock issued
on account		-		-		913,125		913		100,687		-			-			101,600

Stock issued
for debt		-		-		118,750		119		18,881								19,000

Stock issued for
acquistions/investments		-		-		19,074,375		19,074		1,507,826		-			-			1,526,900

Stock issued
for cash		-		-		2,411,250		2,411		240,589		-			-			243,000

Net Loss March 31, 2006		-		-		-		-		-		-			(598,319	)		(598,319	)

Balance at March 31, 2006		-		-		41,447,209		41,447		10,954,247		(420	)		(6,904,714	)		4,090,560

Net Loss June 30, 2006		-		-		-		-		-		-			(217,998	)		(217,998	)

Balance at June 30, 2006		-	$	-		41,447,209	$	41,447	$	10,954,247	$	(420	)	$	(7,122,712	)	$	3,872,562

See accompanying notes to the consolidated financial statements

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VITALTRUST BUSINESS DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2006 and 2005

	(UNAUDITED)			(UNAUDITED)
	For the Six			For the Six
	Months Ended			Months Ended
	6/30/2006			6/30/2005

CASH FLOWS FROM OPERATING ACTIVITIES:

NET LOSS	$	(816,317	)	$	(2,494,775	)

RECONCILIATION OF NET LOSS TO CASH FLOWS
(USED IN) PROVIDED BY OPERATING ACTIVITIES
Gain on sale of portfolio investments		(10,000	)		-
Stock issued for services		-			457,500
Depreciation		168			-
Capitalized interest		8,879			-
Unrealized depreciation on investments		427,600			1,392,144
Amortization of beneficial conversion feature/debt discount		23,552			84,445
Decrease in prepaid expenses		(10,619	)		(5,730	)
Decrease in other assets		45,000			-
Increase (decrease) in accounts payable and accrued expenses		(29,981	)		72,372

CASH FLOWS USED IN OPERATING ACTIVITIES		(361,718	)		(494,044	)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets		(5,044	)		-
Purchase of investments		(15,288	)		(35,076	)
CASH FLOWS USED IN INVESTING ACTIVITIES		(20,332	)		(35,076	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable		-			276,262
Advances from related party		190,463			256,620
Repayments of advances to related party		(93,045	)		-
Payments received on note receivable from related party		98,600			-
Proceeds from common stock issuance		243,000			-
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		439,018			532,882

NET DECREASE IN CASH		56,968			3,762

CASH, BEGINNING OF THE YEAR		144			3,413

CASH, END OF THE PERIOD	$	57,112		$	7,175
Supplementary Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes	$	-		$	-

Interest	$	-		$	-


Supplementary Disclosure of Noncash Investing and
Financing Activities Flow Information:

Common stock issued to pay off debt	$	-		$	219,140

Preferred stock issued to pay off debt	$	-		$	451,032

Preferred stock issued to pay off debt of portfolio company	$	-		$	1,357,069


Common stock issued for debt	$	19,000		$	-

Common stock issued for acquisitions	$	1,526,900		$	-

Common stock issued for subscription receivable	$	101,600		$	-

See accompanying notes to the consolidated financial statements

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	VITALTRUST BUSINESS DEVELOPMENT CORPORATION
	SCHEDULE OF INVESTMENTS
	AS OF JUNE 30, 2006 and DECEMBER 31, 2005

	UNAUDITED														AUDITED
											June 30, 2006				December 31, 2005
				Title of		6/30/2006
	Portfolio			Securities		Percentage of
	Company	Industry		Held		Class Held					Cost		Fair Value		Cost		Fair Value


American Card Services, Inc.			Financial		Common
Services					Stock		100.0	%			$	2,874,358	$	-	$	2,855,191	$	-

VitalTrust Solutions, Inc.			Intellectual		Common
(f/k/a ESPG, Inc.)			Property		Stock		100	%	(1	)		4,041,250		4,041,250		2,516,250		2,516,250

NX2U, Inc.			CD Catalogs		Common
Stock							0.0	%	(2	)		-		-		525,000		240,000

Total											$	6,915,608	$	4,041,250	$	5,896,441	$	2,756,250


(1) As of December 31, 2005, the Company owned 80% of VitalTrust Solutions, Inc.
(2) As of December 31, 2005, the Company owned 44% of NX2U, Inc.

See accompanying notes to the consolidated financial statements

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NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim periods presented. The consolidated financial statements are unaudited and are subject to such year-end adjustments as may be considered appropriate and should be read in conjunction with the historical consolidated financial statements of VitalTrust Business Development Corporation for the years ended December 31, 2005, 2004 and 2003 included in VitalTrust Business Development Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Operating results for the six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

These financial statements have been prepared in accordance with US GAAP and under the same accounting principles as the financial statements included in the Annual Report on Form 10-K. Certain information and footnote disclosures related thereto normally included in the financial statements prepared in accordance with US GAAP have been omitted in accordance with Rule 10-01 of Regulation S-X.

Company Activities

VitalTrust Business Development Corporation (formerly known as Kairos Holdings Inc., ACS Holdings, Inc. and maxxZone.com, Inc) was incorporated in the state of Nevada in April, 2002.

On April 12, 2006, the Company amended its Corporate Charter to reflect the name change from Kairos Holdings, Inc. to VitalTrust Business Development Corporation.

On April 28, 2004 VitalTrust Business Development Corporation (“the Company”) agreed to acquire the assets, subject to certain liabilities of American Card Services, Inc (ACS) for 3,570,000,000 shares of the Company, representing approximately 85% of the Company's stock. The assets, liabilities, and operations acquired from ACS have been recorded on the books of the company, and ACS is deemed a wholly owned subsidiary of the Company. In connection with this acquisition, the original assets and liabilities of the Company, (those not acquired from ACS), were transferred to Global Capital Trust, a St. Kitts and Nevis Trust, and holder of 84,000,000 shares of company stock. This transfer effectuated the extinguishment of debt owed to Global Capital Trust and related entities by the Company. The acquisition of ACS and transfer to Global Capital Trust were completed on May 12, 2004, after the Company increased authorized shares to a total sufficient to effect the transaction.

Since the acquisition resulted in the shareholders of American Card Services, Inc. owning a majority of the Company’s outstanding shares, the business acquisition has been accounted for as a reverse acquisition, with VitalTrust Business Development Corporation being treated as the accounting subsidiary and American Card Services, Inc. being treated as the accounting parent. Accordingly, the net assets of ACS were carried forward to Holdings at their historical carrying value. On August 3, 2004, the Company filed an election to adopt Business Development Company (“BDC”) status (see below). This BDC status reclassified ACS as a portfolio investment of VitalTrust Business Development Corporation.

On August 3, 2004 the Company’s shareholders consented to the proposal to allow the Company to adopt Business Development Company ("BDC") status under the Investment Company Act of 1940 ("1940 Act"). A BDC is a specialized type of Investment Company under the 1940 Act. A BDC may primarily be engaged in the business of furnishing capital and managerial expertise to companies that do not have ready access to capital through conventional financial channels; such companies are termed "eligible portfolio companies". The Company as a BDC, may invest in other securities, however such investments may not exceed 30% of the Company's total asset value at the time of such investment. The Company filed its BDC election with the SEC (Form N-54A) on August 3, 2004.

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On November 15, 2004, the Chief Executive Officer, Walter H. Roder, II, tendered his resignation to the Board of Directors. The resignation was accepted by the Board of Directors on November 16, 2004. Mr. Roder, while he remains a shareholder, elected to relinquish day-to-day management to the current management. He has also elected to step down from the board so that new independent directors could be appointed consistent with the requirements and process of the Company's election to be governed as a business development company.

Once the new directors assumed office, a restructuring plan was put into place to adjust the Company’s capital structure and to move the Company into compliance with BDC regulations. On February 18, 2005 the Company restructured $1,818,101 of notes with creditors of both the Company and American Card Services, Inc. by entering into a Settlement and Release Agreement whereby the creditor’s notes would be converted into preferred equity. Terms of the agreement call for the issuance of preferred shares and warrants and revenue sharing of 25% of the net revenue of the Company. The Company converted the preferred stock and warrants into common stock on September 20, 2005.

The Company completed the restructuring on August 31, 2005.

On May 17, 2005 in a Consent to Action by the Stockholders of the Company, the Board of Directors approved and authorized the Officers of the Corporation to effect a reverse split at a ratio of 1250 to 1 of the common stock of the company and to decrease the authorized common stock from 2.4 billion shares to 50 million shares. This Consent also authorized a reverse split of 1250 to 1 of the preferred stock of the company and to decrease the authorized preferred stock from 600 million shares to 30 million shares.

On March 15, 2006 in a Consent to Action by the Stockholders of the Company, the Board of Directors approved and authorized an increase of the common shares to 100 million from 50 million. The Board also amended and increased the preferred shares from three classes totaling 30 million shares to one class totaling 50 million shares. The Company has not yet amended its Corporate Charter with the State of Nevada to reflect these changes.

On March 31, 2006, the Company purchased the remaining 20% of the stock of VitalTrust Solutions, Inc. (“Solutions”) (formerly known as Entellectual Solutions Property Group, Inc. or “ESPG”) making Solutions a wholly owned 100% subsidiary of the Company.The shareholders of ESPG obtained control of the Company as of the date of the transaction, effectively owning in excess of 65% of the Company’s common stock. Management has treated this transaction similar to a recapitalization and continues to present its historical financial statements and not those of ESPG. Management has determined that ESPG should be properly treated as a portfolio investment of the Company and not as the accounting acquirer, since the Company is not a public shell and reverse acquisition accounting is not appropriate under the circumstances. In addition, the Company accepted the resignations of Charles Giannetto, James E. Jenkins and David Eison as directors of the Company and David Eison and Mark Width as officers. Further, the Company announced the appointment of Charles Broes as CEO.

The Company plans to provide equity and long-term debt financing to small and medium--sized private companies in a variety of industries throughout the United States. The Company’s investment objective is to achieve long-term capital appreciation in the value of its investments and to provide current income primarily from interest, dividends and fees paid by its portfolio companies.

Consolidation

During 2005 the Company formed Kairos Consulting, Inc. (Consulting). This entity is a Florida Corporation that provides managerial, financial, consulting and legal services to outside companies. Kairos Consulting, Inc. is owned 100% by the Company. Also during 2005, the Company formed Red Fox Energy Corp. (Red Fox). This entity is a shell company that will be used by the Company for investments in select energy companies, and is also 100% owned by the Company.

The consolidated financial statements include the accounts of Kairos Consulting, Inc. and Red Fox. All intercompany accounts and transactions have been eliminated in consolidation.

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Going Concern

The accompanying financial statements assume the Company will continue as a going concern. As shown in the accompanying financial statements, the Company had net losses of $816,317 and $2,494,775 for the six months ended June 30, 2006 and 2005, respectively. As of June 30, 2006, the Company has had limited revenue. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its business. Management has plans to seek additional capital through debt and/or equity financing. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue its existence.

Restatement

The Statements of Operations for the three and six months ended June 30, 2005 and the Statement of Cash Flows for the six months ended June 30, 2005 have been restated to reflect the beneficial conversion features of convertible preferred stock and convertible debt that were issued in 2005 and not accounted for in the Company's 2005 quarterly filings of Form 10-Q. The net effect of the adjustments was to increase the net loss by $73,613 and $204,445 for the three and six months ended June 30, 2005, respectively.

Income Recognition

The Company and its portfolio companies recognize revenue using the accrual method of accounting. The accrual method provides for a better matching of revenues and expenses.

The Company’s policy is to accrue interest income on loans made to portfolio companies. The Company accrues the interest on such loans until the portfolio company has the necessary cash flow to repay such interest. If the Company’s analysis of the portfolio companies’ performance indicates that a portfolio company may not have the ability to pay the interest and principal on a loan, the Company will make an allowance provision on that entity and in effect cease recognizing interest income on that loan until all principal has been paid. However, the Company will make exceptions to this policy if the investment is well secured and in the process of collection.

For certain investment transactions the Company provides management services and plans to recognize an agreed upon fixed monthly fee in the future.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions 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 these estimates.

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Cash and Cash Equivalents

Cash and cash equivalents includes time deposits with original maturities of three months or less.

Income Taxes

The Company complies with SFAS No. 109, “Accounting for Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for temporary differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Following the changes in control of the Company in November 2004 and March 2006, the Company’s pre-change-in-control net operating loss carryforwards will be substantially limited, if not completely eliminated, due to a lack of continuity of business enterprise under Section 382 of the Tax Reform Act of 1986. No federal tax expense or benefit has been recorded in the financial statements due to the uncertainty of future operations.

Net Income (Loss) Per Common Share

Net Income (Loss) per common share is computed using the weighted average of shares outstanding during the periods presented in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share. Basic net income (loss) per common share excludes the effect of potentially dilutive securities and is computed by dividing net income or loss by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is adjusted for the effect of convertible securities, warrants and other potentially dilutive financial instruments only in the periods in which such effect would have been dilutive.

Segments

The Company operates as one segment as defined by Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information.

Fixed Assets

Fixed assets are stated at cost. The cost of equipment is charged against income over the estimated useful lives of the equipment, using the straight-line method of depreciation. Repairs and maintenance which are considered betterments and do not extend the useful life of equipment are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation is removed from the accounts and the resulting profit and loss are reflected in income. As of June 30, 2006, the Company owns computer equipment at a cost of $5,044 with deprecation expense, and accumulated depreciation, of $168 for the six months then ended. Prior to June 2006, the Company did not own any assets.

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Fair Value of Financial Instruments

The recorded amounts for financial instruments, including cash equivalents, prepaid expenses, notes receivable, other current assets, investment in related management company, portfolio investments, accounts payable and accrued expenses, and all short-term debt approximate their market values as of June 30, 2006. The Company has no investments in derivative financial instruments.

Goodwill and Other Intangibles

The Company records Goodwill in accordance with Statement of Financial Accounting Standards No.142, Goodwill and Other Intangible Assets. Intangible assets such as goodwill are not amortized; instead the Company will review the goodwill not less than annually to see if it has been impaired. If an impairment has incurred, it will be recorded as an expense in that period. The Company does not currently have Goodwill or Other Intangible Assets.

NOTE B - INVESTMENTS

The Company has investments in two types of entities; A related Management Company and Portfolio Companies. For the valuation of its investment in the related Management Company, please see Note J - Related Party Transactions.

Valuation of Investments- Portfolio Companies

The most significant estimate inherent in the preparation of the Company's financial statements is the valuation of its investments in portfolio companies and the related unrealized appreciation or depreciation on those investments.

Upon conversion to a BDC, the Board of Directors states all portfolio company investments at fair value as determined under a good faith standard. The Company has investments in two controlled investment companies as of June 30, 2006.

1.	American Card Services, Inc.

American Card Services, Inc. (“ACS”) is a Delaware corporation which prior to November 2004 sought to capture a large portion of the rapidly emerging stored-value debit card market that provides unbanked ethnic customers with a viable alternative to cash and traditional money transfers. ACS has since changed its direction and is seeking out investments in financial services and real estate entities. The Company currently owns 100% of the stock of American Card Services, Inc. Based on Management’s good faith estimate, the fair market value of American Card Services, Inc. at June 30, 2006 and December 31, 2005 is deemed to be $0 and therefore, the Company has fully reserved against the investment’s carrying cost of $2,874,358 and $2,855,191, respectively.

American Card Services, Inc. owns 100% of ACS Transaction Processing, Inc. a Delaware Corporation, incorporated in August 2003. ACS Transaction Processing had no business activity through June 30, 2006.

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American Card Services, Inc. owns 100% of ACS Sales, Inc. a Delaware Corporation incorporated in August 2003. ACS Sales, Inc. had no business activity through June 30, 2006.

2. VitalTrust Solutions, Inc. (f/k/a Entellectual Solutions Property Group, Inc. or “ESPG”)

VitalTrust Solutions, Inc. is a private Florida corporation based in Tampa, Florida that is focused on developing, acquiring, integrating and delivering vital technologies and solutions to the market. It currently owns 3 product lines: (1) Campus, an enterprise level application service provider (ASP) designed as a productivity enhancement system; (2) VitalTrust- a nationwide network of Community Healthcare Information Utilities for healthcare information archive and provider share technology; and (3) Health Centrics, a fully developed medical practice manager designed from the outset in the Application Service Provider model.

As of June 30, 2006, the Company owns 100% of the outstanding common stock of VitalTrust Solutions, Inc. As at December 31, 2005, the Company owned 80% of VitalTrust Solutions, Inc.

As of June 30, 2006 and December 31, 2005, the Company has used a good faith estimate to value its investment in VitalTrust Solutions, Inc. at $4,041,250 and $2,516,250, respectively. These amounts represent the Company’s cost in this investment upon the respective dates, and it is Management's opinion that these costs approximate the fair value of these investments respectively.

NOTE C - STOCK ISSUED FOR SERVICES

During the three and six months ended June 30, 2006, the Company issued no stock for services. For the three and six months ended June 30, 2005 the Company issued 440,000 and 740,000 shares of common stock, respectively to KMA Capital Partners, Ltd, for services rendered in connection with the reorganization of the Company. The cost of these shares was $187,000 and $337,000, respectively. The Company also issued 0 and 240,000 shares of the Company’s preferred stock to KMA Capital Partners, Ltd. for the three and six months ended June 30, 2005 respectively, as part of the reorganization of the Company. The value of these shares was $0 and $120,000. The value assigned to the above shares is based on the stock’s traded market price on or about the date the shares were issued and are included in professional fees.

NOTE D -- COMMITMENTS AND CONTINGENCIES

The Company leases office and operating facilities from a related entity under short-term (month to month) operating leases.

Rent expense for the three and six months ended June 30, 2006 was $3,823 and $26,895, respectively. Rent expense for the three and six months ended June 30, 2005 was $2,777 and $926, respectively.

The Company filed on March 22, 2005, a civil suit in Orange County District Court, Orlando Florida against the former CEO of the Company, Walter Roder. The litigation alleges among other causes of action, various breaches of fiduciary and statutory duties. The Company intends to vigorously pursue its remedies against Mr. Roder.

All other matters involving pending or prospective litigation have been dismissed or resolved.

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NOTE E - NOTES PAYABLE

Notes payable as of June 30, 2006 and December 31, 2005 consisted of the following:


	June 30, 2006	December 31, 2005
8% convertible debenture dated June 13, 2005 in the amount of $40,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	43,481	41,782
8% convertible debenture dated June 27, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	21,535	20,694
8% convertible debenture dated June 27, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	21,674	20,827
8% convertible debenture dated June 28, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	21,669	20,822

8% convertible debenture dated July 1, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	21,658		20,812
8% convertible debenture dated July 7, 2005 in the amount of $10,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	10,815		10,393
8% convertible debenture dated July 11, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	21,611		20,766
8% convertible debenture dated July 13, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	21,602		20,757
8% convertible debenture dated July 13, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	21,602		20,757
8% convertible debenture dated July 28, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing ask price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.	21,631		20,689
Subtotal Less: Discount on Convertible Debentures Total		227,178 0 $ 227,178		218,299 23,552 $ 194,747

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At June 30, 2006 and December 31, 2005, all of these notes were deemed short term.

The Company has included accrued interest of $17,178 and $8,299 in the note balances as of June 30, 2006 and December 31, 2005, respectively.

All of the convertible notes payable (debentures) outstanding at June 30, 2006 are currently in default. However, the Company has issued 420,000 shares of its common stock into a reserve escrow account to satisfy these debts. The Company plans to settle with each creditor by either issuing stock in an amount equal to the value of their note or liquidate the stock and pay cash to the creditors.

NOTE F - STOCKHOLDERS EQUITY

As of June 30, 2006 the authorized capital of the company is 50,000,000 shares of common voting stock with a par value of $.001 per share and 10,000,000 shares of convertible preferred stock Class A with a par value of $.001 per share. The company has also authorized 10,000,000 shares of preferred Class B stock with a par value of $.001 per share and 10,000,000 shares of preferred Class C stock with a par value of $.001 per share. All terms, rights and preferences of the Class B and C preferred stock are determined by the Board of Directors at the time of issuance. No shares of convertible preferred stock Class A or preferred stock Classes B or C were issued or outstanding as of June 30, 2006 or December 31, 2005.

On March 15, 2006, the Board of Directors on behalf of the Company has authorized and approved the Company to increase the authorized common shares from 50,000,000 to 100,000,000 common shares. The Board also approved the consolidation of three classes of preferred shares from three classes to one, and has authorized the increase in shares from 30,000,000 to 50,000,000 preferred shares. As of the date of this report, however, the Company has not amended its Corporate Charter with the State of Nevada to reflect this change.

NOTE G - CONCENTRATION OF CREDIT RISK

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of cash.

The Company maintains its cash accounts with financial institutions located in Florida. Federal Deposit Insurance Corporation (FDIC) guarantees the Company's deposits in financial institutions up to $100,000 per account.

The Company had no deposits with financial institutions that exceeded the federally insured limit at June 30, 2006 or December 31, 2005. Historically, the Company has not experienced any losses on its deposits in excess of federally insured guarantees.

NOTE H- COMMON STOCK SHARES ISSUED INTO ESCROW

On June 13, 2005, The Company settled a disputed debt with a creditor. The terms of the settlement required the Company to place 180,000 shares of its common stock into escrow as collateral against a $22,500 debt due to this creditor. At September 30, 2005, the debt was fully satisfied; however, the shares still remain in escrow.

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NOTE I- PREFERRED STOCK AND WARRANTS

On February 18, 2005, the Company entered into an agreement with its major note holder and the note holders of American Card Services, Inc. to exchange the debt that existed at February 18, 2005 for equity securities of the Company. The Company issued 240,000 shares of convertible preferred stock and 260,000 warrants to the note holders. (The Company also issued 240,000 shares of convertible preferred stock to KMA Capital Partners, LTD for professional services rendered in connection with the restructuring of this debt.) The number of shares and warrants to be issued was determined based on the value of the securities on the grant date in relation to the debt owed to the note holders. The warrants are convertible into preferred stock at a price of $.0001 and become convertible at the earlier of the effective date of a reverse split or six months. The convertible preferred shares are convertible into common stock one to one. The convertible preferred shares shall be entitled to one vote per share and, as a group, shall be entitled to a revenue sharing dividend of 25% of net revenues of the Company. Net revenue is defined as the net revenue as reported under SEC filings. Said dividend may be payable in cash or common stock at the option of the investors. The convertible preferred shares are callable by the Company at 120% of value after 24 months.

In accounting for the transaction, the Company used APB Opinion 23, Early Extinguishment of Debt. In Footnote 1 of APB 23, “extinguishment transactions between related parties may in essence be capital transactions” and not immediate recognition of income. Emerging Issues Task Force (EITF) 98-5, Accounting for Convertible Securities with Beneficial Conversion Features of Contingently Adjustable Conversion Ratios, takes the position that embedded beneficial conversion features of convertible securities should be recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is the difference between the conversion price and the fair value of the security. In addition, any recorded discount resulting from the allocation of proceeds to the beneficial conversion feature is analogous to a dividend (deemed dividend) and should be recognized as a return to the preferred shareholder over the minimum period from the date of issuance to the date at which the preferred shareholder can realize that return using the effective yield method.

The convertible preferred shares are convertible on the date of issuance and the embedded beneficial conversion feature is recognized immediately On the date of issuance of the preferred stock (February 28, 2005), the Company recorded a deemed dividend of $120,000 using the intrinsic value of each convertible share (.5) multiplied by the number of shares (240,000).

The warrants, as stated above, are convertible to preferred shares upon the earlier of the effective date of a reverse stock split or six months. The Company effectuated a reverse stock split of 1250:1 on of May 17, 2005. This reverse split triggered the embedded beneficial conversion feature of the warrants and therefore, the Company recorded a deemed dividend of $130,000 (260,000 warrants multiplied by the intrinsic value of .5).

On September 20, 2005, all Class A preferred stock and the warrants were converted into common stock.

NOTE J- RELATED PARTY TRANSACTIONS

ACS, one of the Company's portfolio companies, owes Mr. Roder and affiliates $474,500 in notes payable at June 30, 2006 and December 31, 2005 respectively, and approximately $249,905 and $208,184 in accrued interest at June 30, 2006 and December 31, 2005, respectively.

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Effective January 1, 2005, the Company entered into a one year consulting contract with KMA, at a fee of $125,000 per month, to be payable in cash or in Rule 144 stock of the Company with an equivalent fair value. The Company was was charged an additional $25,000 fee for January 2005. The consulting agreement provides for consulting advice regarding the Company's business plan, contemplated business operations, strategic planning, financial advisory services and merger and acquisition advisory services in relation to the restructuring of the Company. By mutual consent, the consulting contract was terminated as of August 31, 2005. The amount of these services totaled $375,000 and $895,000 for the three and six months ended June 30, 2005, respectively. All of these fees were classified as Professional Fees - Related Party.

In January 2006, the Company entered into another one year consulting contract with KMA at a fee of $35,000 per month, plus incidentals, to be payable in cash. However, the contract was altered as of April 1, 2006 to establish a new monthly fee which is based on the time actually spent on managing the account as opposed to a fixed monthly fee. For the three and six months ended June 30, 2006, the Company has paid $98,600 and $208,367, respectively, to KMA which have all been classified as Professional Fees - Related Party.

In connection with the February 2005 restructuring of American Card Services, Inc., the Company issued 240,000 shares of its convertible preferred class A stock to KMA for professional services rendered. The beneficial conversion feature of the preferred stock was recorded as professional fees in the accompanying statement of operations for the three and six months ended June 30, 2005. The amount of this conversion feature was $120,000. See Note I- “Preferred Stock and Warrants.”

On September 21, 2005, the Company exchanged with KMA Capital Partners, Ltd. 1,500,000 shares of its Rule 144 restricted stock for 30,000,000 shares of NX2U, Inc. stock (a pink sheet company). On February 24, 2006, KMA purchased these shares back from the Company in exchange for a $250,000 note. The note is non interest bearing with no repayment schedule; however, the Company expects to be repaid in full by September 30, 2006 and has therefore recorded this loan in the current assets section of the balance sheet. At June 30, 2006, the unpaid balance of this loan is $151,400.

On October 17, 2005, the Company exchanged 9 units of KMA Capital Partners, Ltd. limited partnership units for 3,707,762 of the Company’s stock. The cost of the investment was based on the fair value of the Company’s stock at the date of the exchange, less a discount for lack of marketability. On February 27, 2006, KMA Capital Partners, Ltd. merged with NEXTU, Inc. (with NEXTU, Inc. being the surviving entity and its name changed to KMA Capital Partners, Inc.) and the limited partnership units were exchanged for 4,156,635 shares of KMA Capital Partners, Inc. stock. The cost basis of the investment has been reduced to its quoted market value as of June 30, 2006. At June 30, 2006, KMA Capital Partners, Inc. stock was trading at $.01 per share giving the investment a market value of $41,567.

NOTE K - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

FASB Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.” In December 2004, the FASB issued SFAS 123R, which requires that the cost of all share-based payments to employees, including stock option grants, be recognized in the financial statements based on their fair values. The standard applies to newly granted awards and previously granted awards that are not fully vested on the date of adoption. The Company adopted this standard on January 1, 2006 and has determined that there is no impact on these financial statements as no new share-based payments have been issued to employees.

FASB Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3.” In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3”, referred to as SFAS 154, which replaces APB Opinion No. 20, "Accounting Changes", and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”, and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS 154 applies to all voluntary changes in accounting principles. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. It does not change the transition provisions of any existing accounting pronouncements, including those that are in a transition phase as of the effective date of SFAS 154.

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In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) an interpretation of FASB Statement No. 109, "Accounting for Income Taxes", which clarifies the accounting for uncertainty in income taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation requires that the Company recognize in the financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on de-recognition of a previously recognized tax position, classification, interest and penalties, accounting in interim periods and disclosures. The provisions of FIN 48 are effective beginning January 1, 2007 with the cumulative effect of the change in accounting principle recorded as an adjustment to the opening balance of retained earnings. The Company adopted this standard in June 2006 and has determined that there is no impact on these financial statements.

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Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations

Current Overview

The Company held its board meeting in April 2006, in its new Tampa, FL business development offices. At this meeting, the board elected to change its name from Kairos Holdings, Inc. (formed in Nevada April, 2002); previously known as ACS Holding, Inc and MaxxZonne.com, Inc) to: VitalTrust Business Development Corporation (the “Company”). On May 11th, 2006 the new name was accepted and changed by the state of Nevada, effective April 12, 2006. The public filings should reflect the changes along with a new ticker symbol soon. The board believes the new name will better reflect its vision and business plan of the Company. The board also approved its new business plan which is focused on bringing VitalTrust Solutions, Inc. (a portfolio company investment) to the healthcare industry.

VitalTrust Business Development Corporation is a financial service company providing financing and advisory services to small and medium-sized companies throughout the United States. Effective August 3, 2004 the Company stockholders approved the proposal to allow the Company to convert to a business development company (“BDC”) under the Investment Company Act of 1940 (“1940 Act”).

VitalTrust Business Development Corporation intends to make long-term debt and equity investments in cash-flow positive companies with perceived growth potential primarily in the energy sectors. The Investment Committee has adopted a charter wherein these two criteria are weighed against other criteria including strategic fit, investment amount, management ability, etc. In principle, the Company preference is to make investments in portfolio companies in which it can acquire at least a 51% ownership interest in the outstanding capital of the portfolio company.

Investment opportunities will be identified for the Company by the management team. Investment proposals may, however, come to the Company from many sources, and may include unsolicited proposals from the public and from referrals from banks, lawyers, accountants and other members of the financial community. The management team brings an extensive network of investment referral relationships.

The Company offices are as follows: Directors offices, at: 3000 Bayport Dr, Suite 910, P.O. Box 23412 Tampa, FL 33623. Phone, 813-785-2000, FAX 813-884-5282

Corporate and satellite offices are as follows: 10945 State Bridge Road, St. 401, #341, Alpharetta, GA 30022; Central Region Office at 2500 City West Boulevard, Suite 300, Houston, Texas 77042; VitalTrust Solutions, Inc., 266 Harbor Road, Sands Point, NY 11050; and VitalTrust Medi-Pharma, Inc., Dick Furlong, CEO, 10650 72^nd Street, #405, Largo, FL 33777.

Portfolio Investments

The Company has investments in two controlled (portfolio) companies as of June 30, 2006.

1. American Card Services, Inc.

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American Card Services, Inc. owns 100% of ACS Transaction Processing, Inc., a Delaware Corporation incorporated in August 2003. ACS Transaction Processing had no business activity through June 30, 2006.

American Card Services, Inc. owns 100% of ACS Sales, Inc., a Delaware Corporation incorporated in August 2003. ACS Sales, Inc. had no business activity through June 30, 2006.

2. VitalTrust Solutions, Inc.

VitalTrust Solutions, Inc. is a private Florida corporation based in Tampa, Florida that is focused on the developing, acquiring, integrating and delivering vital technologies and solutions to the market. It currently owns three product lines: (1) Campus, an enterprise level application service provider (ASP) designed as a productivity enhancement system; (2) VitalTrust- a nationwide network of Community Healthcare Information Utilities for healthcare information archive and provider share technology; and (3) HealthCentrics, a fully developed medical practice manager designed from the outset in the Application Service Provider model.

As of June 30, 2006, the Company owns 100% of the outstanding common stock of VitalTrust Solutions, Inc.

Disposition of Investments

On February 24, 2006, the Company sold its interest in the stock of NEX2U, Inc., a publicly traded pink sheet company, for a $250,000 note to KMA Capital Partners, Ltd. At the time of sale, the stock’s net value on the books of the Company was $240,000 thus netting a gain of $10,000.

Valuation of Investments

The most significant estimate inherent in the preparation of the Company’s financial statements is the valuation of its investment and the related unrealized appreciation or depreciation.

Upon the Company’s conversion to a business development company, the Board of Directors determined the value of its portfolio companies and investments at fair market value under a good faith standard.

Investments in Private Companies

The Company intends to provide privately negotiated long-term debt and equity investment capital. The Company will provide capital in the form of debt with or without equity features, such as warrants or options, often referred to as mezzanine financing. In certain situations the Company may choose to take a controlling equity position in a company. The Company’s private financing will be used to fund growth, buyouts, and acquisitions and bridge financing.

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The Company intends to fund new investments using cash through the issuance of stock and debt. The Company intends to reinvest accrued interest, dividends and management fees into its various investments. When the Company acquires a controlling interest in a company, the Company may have the opportunity to acquire the company’s equity with its stock. The issuance of its stock as consideration may provide the Company with the benefit of raising equity without having to access the public markets in an underwritten offering, including the added benefit of the elimination of any underwriting commission.

As a business development company, the Company is required to provide significant managerial assistance available to the companies in its investment portfolio. In addition to the interest and dividends received from the Company’s private finance investments, the Company will often generate additional fee income for the structuring, due diligence, transaction and management services and guarantees we provide to its portfolio companies.

Governmental Regulation

Business Development Company

A business development company is defined and regulated by the 1940 Act. Although the 1940 Act exempts a business development company from registration under the Act, it contains significant limitations on the operations of a business development company.

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. A business development company provides shareholders the ability to retain the liquidity of a publicly traded stock, while sharing in the possible benefits, if any, of investing in primarily privately owned companies. To qualify as a business development company, a company must:

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Have registered a class of its equity securities or have filed a registration statement with the Securities and Exchange Commission pursuant to Section 12 of the Securities and Exchange Act of 1934

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Operate for the purpose of investing in securities of certain types of portfolio companies, namely emerging companies and businesses suffering or just recovering from financial distress

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Extend significant managerial assistance to such portfolio companies and

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Have a majority of “disinterested” directors (as defined in the 1940 Act).

Generally, a business development company must be primarily engaged in the business of furnishing capital and providing managerial expertise to companies that do not have ready access to capital through conventional financial channels. An eligible portfolio company is generally a domestic company that is not an investment company (other than a small business investment company wholly owned by a business development company), and that:

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Does not have a class of securities registered on an exchange or included in the Federal Reserve Board’s over-the-counter margin list; or

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Is actively controlled by a business development company and has an affiliate of a business development company on its board of directors; or

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Meets such other criteria as may be established by the Securities and Exchange Commission

Control under the 1940 Act is presumed to exist where a business development Company beneficially owns more than 25% of the outstanding voting securities of the portfolio company.

The 1940 Act prohibits or restricts companies subject to the 1940 Act from investing in certain types of companies such as brokerage firms, insurance companies, investment banking firms and investment companies.

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

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Securities purchased in transactions not involving any public offering, the issuer of which is an eligible portfolio company;

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Securities received in exchange for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants or rights relating to such securities; and

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Securities of bankrupt or insolvent companies that were eligible at the time of the business development company’s initial acquisition of their securities but are no longer eligible, provided that the business development company has maintained a substantial portion of its initial investment in those companies.

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Cash, cash items, government securities or high quality debt securities (within the meaning of the 1940 Act), maturing in one year or less from the time of investment

A business development company is permitted to invest in the securities of public companies and other investments that are not qualifying assets, but those kinds of investments may not exceed 30% of the business development companies’ total asset value at the time of the investment.

As a business development company, the Company is 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 asset coverage of at least 200% immediately after each such issuance.

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The Company is also prohibited under the 1940 Act from knowingly participating in certain transactions with its affiliates without the prior approval of its board of directors who are not interested persons and, in some cases, prior approval by the Securities and Exchange Commission.

A business development company must make significant managerial assistance available to the issuers of eligible portfolio securities in which it invests. Making available significant managerial assistance means among other things, any arrangement whereby the business development company, through its directors, officers or employees, offers to provide and, if accepted does provide, significant guidance and counsel concerning the management, operation or business objectives and policies of a portfolio company.

The Company may be periodically examined by the Securities and Exchange Commission for compliance with the 1940 Act. As of the date of this filing the Company has inquires from the Commission and has answered such inquiries received.

As with other companies regulated by the 1940 Act, a business development company must adhere to certain substantive regulatory requirements. A majority of its directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, the Company is required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

Furthermore, as a business development company, the Company is prohibited from protecting any director or officer against any liability to the Company or our shareholders arising from willful malfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person's office.

The Company maintains a Code of Ethics that establishes procedures for personal investment and restricts certain transactions by its personnel. The Company’s Code of Ethics generally does not permit investment by its employees in securities that may be purchased or held by the Company.

The Company may not change the nature of its 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 its shares. A majority of the outstanding voting securities of a company is defined under 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. Since the Company elected to become a business development company election, it has not made any substantial change in the nature of its business.

The Company has received several inquiries from the SEC regarding its status as a BDC. The Company has responded to these inquiries in a timely manner and as referenced in the Overview section has completed its restructuring and is now a fully compliant BDC.

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Regulated Investment Company

The Company has not elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986.

Compliance with the Sarbanes-Oxley Act of 2002 and NYSE Corporate Governance Regulations.

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide variety of new regulatory requirements on publicly held companies and their insiders. Many of these requirements will affect us. For example:

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The Company’s chief executive officer and chief financial officer must now certify the accuracy of the financial statements contained in our periodic reports;

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The Company’s periodic reports must disclose conclusions about the effectiveness of its disclosure controls and procedures;

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The Company’s periodic reports must disclose whether there were significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses; and

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The Company may not make any loan to any director or executive officer and may not materially modify any existing loans.

The Sarbanes-Oxley Act has required the Company to review its current policies and procedures to determine whether it complies with the Sarbanes-Oxley Act and the new regulations promulgated thereunder. The Company will continue to monitor its compliance with all future regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance.

Employees

As of June 30, 2006 the Company had no employees. The Officers of the Company provide services as needed for no compensation.

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Risk Factors and Other Considerations

Investing in the Company’s common stock involves a high degree of risk. Careful consideration should be given to the risks described below and all other information contained in this Quarterly Report, including our financial statements and the related notes and the schedules as exhibits to this Quarterly Report.

Limited Operating History as a Business Development Company Which May Impair Your Ability to Assess Our Prospects.

Prior to August 2004 the Company had not operated as a business development company under the Investment Company Act of 1940. As a result, the Company has limited operating results under this regulatory framework that can demonstrate either its effect on our business or management’s ability to manage the Company under these frameworks. In addition, the Company’s management has no prior experience managing a business development company. The Company cannot assure that management will be able to operate successfully as a business development company.

Because there is generally no established market for which to value its investments, the Company’s board of directors’ determination of the value of our investments may differ materially from the values that a ready market or third party would attribute to these investments.

Under the 1940 Act the Company is required to carry its portfolio investments at market value, or, if there is no readily available market value, at fair value as determined by the board. The Company is not permitted to maintain a general reserve for anticipated loan losses. Instead, the Company is required by the 1940 Act to specifically value each individual investment and to record any unrealized depreciation for any asset that has decreased in value. Because, there is typically no public market for the loans and equity securities of the companies in which it invests, the Company’s board will determine the fair value of these loans and equity securities pursuant to its valuation policy. These determinations of fair value may necessarily be somewhat subjective. Accordingly, these values may differ materially from the values that would be determined by a party or placed on the portfolio if a market existed for loans and equity securities.

Investing in Private Companies Involves a High Degree of Risk.

The Company’s portfolio consists primarily of investments in private companies. Investments in private businesses involve a high degree of business and financial risk, which can result in substantial losses and accordingly should be considered speculative. There is generally no publicly available information about the companies in which the Company invests, and the Company relies significantly on the due diligence of its employees and agents to obtain information in connection with its investment decisions. If the Company is unable to uncover all material information about these companies, it may not make a fully informed investment decision and the Company may lose money on its investments.

In addition, some smaller businesses have narrower product lines and market shares than their competition, and may be more vulnerable to customer preferences, market conditions or economic downturns, which may adversely affect the return on, or the recover of, the Company’s investment in such business.

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The Lack of Liquidity of the Company’s Privately Held Investments may Adversely Affect Our Business.

Substantially all of the investments the Company expects to acquire in the future will be, subject to restrictions on resale, including in some instances, legal restrictions, or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to quickly obtain cash equal to the value at which we record our investments if the need arises. This could cause us to miss important business opportunities. In addition, if we are required to quickly liquidate all or a portion of our portfolio, we may realize significantly less than the value at which we have previously recorded our investments.

If the Industry Sectors in which the Company’s Portfolio is Concentrated Experience Adverse Economic or Business Conditions, Our Operating Results may be Negatively Impacted.

The Company’s customer base will be in diversified industries. These customers can experience adverse business conditions or risks related to their industries. Accordingly, if the Company’s customers suffer due to these adverse business conditions or risks or due to economic slowdowns or downturns in these industry sectors the Company will be more vulnerable to losses in its portfolio and our operating results may be negatively impacted.

Economic downturns or recessions may impair the Company’s customers’ ability to repay our loans and harm our operating result.

Many of the companies in which the Company will make investments may be susceptible to economic slowdowns or recessions. An economic slowdown may affect the ability of a company to engage in a liquidity event. The Company’s non-performing assets are likely to increase and the value of its portfolio is likely to decrease during these periods. These conditions could lead to financial losses in its portfolio and a decrease in its revenues, net income and assets.

The Company’s business of making private equity investments and positioning them for liquidity events also may be affected by current and future market conditions. The absence of an active senior leading environment may slow the amount of private equity investment activity generally. As a result, the pace of the Company’s investment activity may slow. In addition, significant changes in the capital markets could have an effect on the valuations of private companies and on the potential for liquidity events involving such companies. This could affect the amount and timing of gains realized on its investments.

The Company’s Borrowers May Default on Their Payments, Which May Have an Effect on Financial Performance.

Some of these companies may be unable to obtain financing from public capital markets or from traditional credit sources, such as commercial banks. Accordingly, advances made to these types of customers may entail a higher degree of risk than advances made to customers who are able to utilize traditional credit sources. These conditions may also make it difficult for the Company to obtain repayment of its loans. Numerous factors may affect a borrower’s ability to repay its loan; including the failure to meet its business plan, a downturn in its industry, or negative economic conditions. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in any related collateral.

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If the Company Fails to Manage Its Growth, its Financial Results Could be Adversely Affected.

The Company’s growth may place a significant strain on its management systems and resources. The Company must continue to refine and expand its marketing capabilities, its management of the investing process, access to financing resources and technology. As the Company grows, it must continue to hire, train, supervise and manage new employees. The Company may not develop sufficient lending and administrative personnel and management and operating systems to manage its expansion effectively. Failure to manage the Company’s future growth could have a material adverse effect on the Company’s business, financial condition and results of operation.

The Company’s Private Finance Investments May Not Produce Current Returns or Capital Gains.

The Company’s private finance investments will be structured as debt securities with a relatively high fixed rate of interest and with equity features such as conversion rights, warrants or other options. As a result, the Company’s private finance investments will be structured to generate interest income from inception of the investment and may also produce a realized gain from an accompanying equity feature. The Company cannot be sure that its portfolio will generate a current return or capital gain.

The Company Operates in a Competitive Market for Investment Opportunities

The Company competes for investments with a large number of private equity funds and mezzanine funds, investment banks and other equity and non-equity based investment funds, and other sources of financing, including traditional financial services companies such as commercial banks. Some of its competitors have greater resources than the Company. Increased competition would make it more difficult for the Company to purchase or originate investments at attractive prices. The Company cannot assure that these competitive pressures will not have a material adverse effect on its business, financial condition and results of operations. As a result of this competition, sometimes the Company may be precluded from making otherwise attractive investments.

Investing in the Company’s Stock Is Highly Speculative and an Investor Could Lose Some or All of the Amount Invested

The value of the Company’s common stock may decline and may be affected by numerous market conditions, which could result in the loss of some or the entire amount invested in its shares. The securities markets frequently experience extreme price and volume fluctuations, which affect market prices for securities of companies generally, and very small capitalization companies in particular. The price of its common stock may be higher or lower than the price you pay for your shares, depending on many factors, some of which are beyond the Company’s control and may not be directly related to operating performance. These factors include the following:

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Price and volume fluctuations in the overall stock market from time to time; which are often unrelated to the operating performance of particular companies;

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Significant volatility in the market price and trading volume of securities of business development companies or other financial service companies; which is not necessarily related to the operating performance of these companies;

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Changes in the regulatory policies or tax guidance with respect to business development companies;

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Actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the experience of securities analysts;

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Loss of business development company (BDC) status

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Changes in the value of our portfolio of investments

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Operating performance of comparable companies

Fluctuations in the trading prices of the Company’s shares may adversely affect the liquidity of the trading market of these shares and, if the Company seeks to raise capital through future equity financings, its ability to raise such equity capital may be limited.

The Company‘s Business Depends on Key Personnel

The Company depends on the continued service of its executive officers and other key management personnel. If the Company were to lose any of these officers or other management personnel, such a loss could result in inefficiencies in the Company’s operations and the loss of business opportunities. The Company does not maintain any key man life insurance on any of its officers or employees.

The Company’s Business Plan is Dependent upon External Financing which may Expose the Company to Risks Associated with Leverage

The Company will require a substantial amount of cash to operate and grow. The Company may acquire additional capital from the following sources:

Senior Securities. The Company intends to issue debt securities, other evidences and preferred stock, up to the maximum amount permitted by the 1940 Act. The 1940 Act currently permits VitalTrust Business Development Corporation, as a business development company, to issue debt securities and preferred stock, to which is referred to as collectively senior securities, in amounts such that the asset coverage, as defined in the 1940 Act, is at least 200% after each issuance of senior securities. As a result of issuing senior securities, the Company will be exposed to the risks associated with leverage. Although borrowing money for investments increases the potential for gain, it also increases the risk of a loss. A decrease in the value of the Company’s investments will have a greater impact on the value of the its common stock to the extent that it has borrowed money to make investments. There is a possibility that the costs of borrowing could exceed the income received on the investments made with such borrowed funds. In addition, the ability to pay dividends or incur additional indebtedness would be restricted if asset coverage is not at least twice that of indebtedness. If the value of assets declines, the Company might be unable to satisfy that test. If this happens, there may be a requirement to liquidate a portion of the loan portfolio and repay a portion of the indebtedness at a time when a sale may be disadvantageous. Furthermore, any amounts used to service indebtedness will not be available for distributions to stockholders.

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Common Stock. Because the Company is limited in its ability to issue debt for the reasons given above, the Company is dependent on the issuance of equity as a financing source. If the Company raises additional funds by issuing more common stock or debt securities convertible into or exchangeable for our common stock, the ownership percentage of stockholders at the time of the issuance would decrease and they may experience dilution. In addition, any convertible or exchangeable securities that may be issued in the future may have rights, preferences and privileges more favorable than those of the common stock.

Securitization. In addition to issuing securities to raise capital as described above, the Company anticipates that in the future it will securitize loans to generate cash for funding new investments. An inability to successfully securitize the Company’s loan portfolio could limit the Company’s ability to grow the business, fully execute its business strategy and impact profitability. Moreover, successful securitization of the loan portfolio might expose the Company to losses as the loans in which the Company does not plan to sell interests will be those that are riskier and more apt to generate losses.

Shares of Closed-End Investment Companies Frequently Trade at a Discount from Net Asset Value.

Shares of closed-end investment companies frequently trade at a discount from net asset value. This characteristic of shares of closed-end investment companies is separate and distinct from the risk that the Company’s net asset value per share will decline.

Changes in the Law or Regulations That Govern the Company Could Have a Material Impact on its Operations

The Company is regulated by the Securities and Exchange Commission. In addition, changes in the laws or regulations that govern business development companies may significantly affect its business. Any changes in the law or regulations that govern its business could have a material impact on operations. The Company is subject to federal, state and local laws and regulations and is subject to judicial and administrative decisions that affect its operations. If these laws, regulations or decisions change, or if the Company expands its business into jurisdictions that have adopted more stringent requirements than those in which it currently conducts business, the Company may incur significant expenses in order to comply or might restrict operations.

The following information should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Form 10-Q.

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Forward Looking Statements

This Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve substantial risk and uncertainties. These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections about the Company’s industry, beliefs, and assumptions. Such forward-looking statements involve risks and uncertainties that could cause outcomes that differ materially from those expressed in the forward-looking statements. Forward-looking statements may include without limitation, statements relating to the Company’s plans, strategies, objectives, expectations and intentions and are intended to be made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, and “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including without limitation:

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The state of securities markets in which the securities of the Company’s portfolio companies trade or could be traded.

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Liquidity within the national financial markets.

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Economic downturns or recessions may impair the Company’s customers’ ability to repay loans and increase non-performing assets.

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A contraction of available credit and/or inability to access the equity markets could impair lending and investment activities.

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The risks associated with the possible disruption in the Company’s operations due to terrorism and,

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The risks and uncertainties described under the caption “Risk Factors and Other Considerations” contained in Part I, Item I, which is incorporated herein by reference.

Although the assumptions on which these forward looking statements are based are reasonable, any of those assumptions also could be incorrect. In light of these and other uncertainties, the inclusion of a projection or forward-looking statements in this Quarterly Report should be regarded as a representation of the Company that its plans and objectives will be achieved. Undue reliance should not be placed on these forward-looking statements, which apply only as of the date of this Quarterly Report.

Critical Accounting Policies and Estimates

The Company prepared its financial statements in accordance with accounting principles generally accepted in the United States of America for investment companies. For a summary of all of its significant accounting policies, including the critical accounting policies, see Note A to the financial statements.

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The increasing complexity of the business environment and applicable authoritative accounting guidance requires the Company to closely monitor its accounting policies. The Company has identified three critical accounting policies that require significant judgment. The following summary of the Company’s critical accounting policies is intended to enhance your ability to assess its financial condition and results of operation and the potential volatility due to changes in estimates.

Valuation of Portfolio Investments

At June 30, 2006, the Company’s portfolio investments represent assets recorded at fair value. Value as defined in Section 2(a)(41) of the 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 determined in good faith by the board of directors. Since there is typically no readily ascertainable market value for the investments in the Company’s portfolio, the fair value of substantially all of investments is determined in good faith by the board of directors pursuant to a valuation policy and consistent valuation process. Because of the inherent uncertainty in determining the fair value of investments that do not have a readily ascertainable market value, the fair value of its investments determined in good faith by the board of directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

Initially, the fair value of each portfolio investment is based upon original cost. 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 Board of Directors considers fair value to be the amount which the Company may reasonably expect to receive for portfolio securities when sold on the valuation date. The Company analyzes and values each individual investment on a quarterly basis, and records unrealized depreciation for an investment that it believes has become impaired, including where collection of a loan or realization of an equity security is doubtful. Conversely, the Company will record unrealized appreciation if it believes that the underlying portfolio company has appreciated in value and, therefore, the Company’s equity security has also appreciated in value. Without a readily ascertainable market value and because of the inherent uncertainty of valuation, the fair value of the Company’s investments determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the favorable or unfavorable differences could be material.

In the valuation process, the Company uses financial information received monthly, quarterly, and yearly from the portfolio companies, which include both audited, and unaudited financial information supplied by portfolio companies management. This information is used to determine financial condition, performance and valuation of the portfolio investments. Valuation should be reduced if a company’s performance and potential have significantly deteriorated. If the factors, which led to the reduction in valuation, are overcome, the valuation may be restated.

Another key factor used in valuation of the equity investments is recent arms-length equity transactions entered into by the investment company. Many times the terms of these equity transactions may not be identical to those of the Company and the impact on these variations, as it relates to market value, may be impossible to quantify.

Any changes in estimated fair value are recorded in the statements of operations as “Net unrealized appreciation (deprecation) on investments.”

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Valuation of Investment in Related Management Company

The Company owns 4,156,635 shares (or 4.1%) of the voting common stock of KMA Capital Partners, Inc. (KMA). KMA is a financial services company that provides management, financial, consulting and strategic planning services to the investment community. KMA is listed on the "pink sheets" under the symbol "KMCP.PK". The stock of this company is thinly capitalized.

The Company values its investment in this related Management Company at $.01 per share, which is the quoted market price at June 30, 2006.

Valuation of Equity Securities

With respect to private equity securities, each investment is valued using industry valuation benchmarks and then the value is assigned a discount reflecting the illiquid nature of the investment, as well as the Company’s minority non-control positions. When an external event such as a purchase transaction, public offering, or subsequent equity sale occurs, the pricing indicated by the external event will be used to corroborate the Company’s private equity valuation. Securities that are traded in the over-the-counter market or on a stock exchange will generally be valued at the prevailing bid price on the valuation date. However, restricted and unrestricted publicly traded securities may be valued at discounts from the public market value due to restrictions on sale, the size of its investment or market liquidity concerns.

Valuation of Loans and Debt Securities

As a general rule, the Company does not value its loans or debt securities above cost, but loans and debt securities will be subject to fair value write-downs when the asset is considered impaired.

Financial Condition

The Company’s total assets at June 30, 2006 increased to $4,364,305 from $3,207,275 at December 31, 2005. The increase in total assets can be attributed to the Company’s increase in investments in portfolio investments.

The Company’s financial condition is dependent on the success of its portfolio holdings. Many of the businesses the Company intends to invest in tend to be thinly capitalized and may lack experienced management. The following summarizes the Company’s investment portfolio as of June 30, 2006 and December 31, 2005, respectively, as a business development corporation.

	June 30, 2006			December 31, 2005

Investment at Cost	$	6,915,608		$	5,896,441

Unrealized (depreciation), net		(2,874,358)	)		(3,140,191	)

Investment at fair value	$	4,041,250		$	2,756,250

Since BDC election, the Company has valued its equity and investment holdings in accordance with the established valuation policies (see “Valuation of Portfolio Investments, Related Management Company and Equity Holdings”) above.

Cash approximated 1% and 0% of net assets of the Company as of June 30, 2006 and December 31, 2005, respectively.

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Results of Operations

The results of operations for the three and six months ended June 30, 2006 and 2005 reflect the results as a business development company under the Investment Company Act of 1940.

Dividends and Interest

There were no dividends or interest income on investments for the three and six months ended June 30, 2006 and 2005, respectively.

Management Fees

There was no Management fee income for the three and six months ended June 30, 2006 and 2005, respectively.

Commitment Fees

The Company received $0 and $40,000 in commitment fee income for the three and six months ended June 30, 2006, respectively, and $0 in commitment fees for the three and six months ended June 30, 2005.

Operating Expenses

Total operating expenses for the three months ended June 30, 2006 and 2005 were $205,201 and $422,365, respectively. A significant component of total operating expenses was professional fees of $181,171 for the three months ended June 30, 2006 and $417,736 for the three months ended June 30, 2005. The decrease in professional fees is primarily due to the Company’s completion of its restructuring. The second component of total operating expenses is general and administrative expenses of $23,862 for the three months ended June 30, 2006 and $4,629 for the three months ended June 30, 2005. The increase in general and administrative expenses is primarily due to the Company’s increase in rent and office expense.

Total operating expenses for the six months ended June 30, 2006 and 2005 were $406,166 and $1,014,080, respectively. A significant component of total operating expenses was professional fees of $348,043 for the six months ended June 30, 2006 and $1,007,374 for the six months ended June 30, 2005. The decrease in professional fees is primarily due to the Company’s completion of its restructuring. The second component of total operating expenses is general and administrative expenses of $57,955 for the six months ended June 30, 2006 and $6,706 for the six months ended June 30, 2005. The increase in general and administrative expenses is primarily due to the Company’s increase in rent and office expense.

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Liquidity and Capital Resources

At June 30, 2006 and December 31, 2005, the Company had $57,112 and $144 respectively in cash and cash equivalents.

The Company expects its cash on hand and cash generated from operations to be adequate to meet its cash needs at the current level of operations, including the next twelve months. The Company generally funds new originations using cash on hand and equity financing and outside investments.

Private Portfolio Company Investments

The following is a list of the private companies in which the Company had an investment in and the cost and fair market value of such securities at June 30, 2006 and 2005:

	March 31, 2006				December 31, 2005
Company	Cost		Fair Value		Cost		Fair Value
American Card Services, Inc.	$	2,874,358	$	-	$	2,855,191	$	-

VitalTrust Solutions, Inc.		4,041,250		4,041,250		2,516,250		2,516,250
(f/k/a ESPG, Inc.)

NX2U, Inc.		-		-		525,000		240,000

Total	$	6,915,608	$	4,041,250	$	5,896,441	$	2,756,250

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s investment activities contain elements of risk. The portion of the Company’s investment portfolio consisting of equity or equity-linked debt securities in private companies is subject to valuation risk. Because there is typically no public market for the equity and equity-linked debt securities in which it invests, the valuation of the equity interest in the portfolio is stated at “fair value” and determined in good faith by the Board of Directors on a quarterly basis in accordance with the Company’s investment valuation policy.

In the absence of a readily ascertainable market value, the estimated value of the Company’s portfolio may differ significantly from the value that would be placed on the portfolio if a ready market for the investments existed. Any changes in valuation are recorded in the Company’s statement of operations as “Net unrealized appreciation (depreciation) on investments”.

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At times, a portion of the Company’s portfolio may include marketable securities traded in the over-the-counter market. In addition, there may be a portion of the Company’s portfolio for which no regular trading market exists. In order to realize the full value of a security, the market must trade in an orderly fashion or a willing purchaser must be available when a sale is to be made. Should an economic or other event occur that would not allow the markets to trade in an orderly fashion, the Company may not be able to realize the fair value of its marketable investments or other investments in a timely manner.

As of June 30, 2006 and 2005, the Company did not have any off-balance sheet investments or hedging investments.

Impact of Inflation

The Company does not believe that its business is materially affected by inflation, other than the impact inflation may have on the securities markets, the valuations of business enterprises and the relationship of such valuation to underlying earnings, all of which will influence the value of the Company’s investments.

Item 4. Control & Procedures

Evaluation of Disclosure Control and Procedures

The Company’s management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that such disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in the internal control or in other factors that could significantly affect those controls subsequent to the Company's evaluation, including corrective actions with regard to significant deficiencies and material weaknesses.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On March 22, 2005, the Company filed a civil suit in Orange County District Court, Orlando Florida against the former CEO of the Company, Walter Roder. The litigation alleges among other causes of action, various breaches of fiduciary and statutory duties. The Company intends to vigorously pursue its remedies against Mr. Roder.

Countersuits have been filed by Mr. Roder and related entities alleging a breach of fiduciary duty and nonpayment of purported obligations. The Company believes these allegations to have no merit.

All other matters involving pending or prospective litigation have been dismissed or resolved.

Item 1A. Risk Factors

Not Applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

NOT APPLICABLE

Item 3. Defaults Upon Senior Securities

During the second and third quarters of 2005, the Company raised proceeds of $210,000 in a private placement of one year 8% convertible debentures. The Debentures are convertible into shares of Common Stock at a conversion price per share equal to 50% of the lowest closing ask price of the Common Stock on the day prior to conversion. None of the June 2005 Debentures have been converted as of December 31, 2005. The June 2005 Debentures are convertible as follows: 20% after 90 days of issuance, and then 20% every sixty days thereafter until the due date of each debenture. The Company has the right to redeem the June 2005 Debentures at a price equal to 200% of the face amount of the debentures, plus accrued interest. The June 2005 debentures are subordinated and junior in right to all accounts payable incurred in the ordinary course of business and/or bank debt of the Company.

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

NOT APPLICABLE

Item 5. Other Information

NOT APPLICABLE

Item 6. Exhibits

Exhibit No.	Description
31.1	Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002

31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002

32.1	Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 906, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002

32.2	Certification 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

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


	VitalTrust Business Development Corporation

Date: August 21, 2006	By:	/s/ Chuck Broes
		Chuck Broes
		Chief Financial Officer

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


	VitalTrust Business Development Corporation

Date: August 21, 2006	By:	/s/ Charles Broes
		Charles Broes
		Chief Executive Officer


	VitalTrust Business Development Corporation

Date: August 21, 2006	By:	/s/ Chuck Broes
		Chuck Broes
		Chief Financial Officer

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