SOURCE: Franchise Capital Corporation

October 26, 2007 09:52 ET

Franchise Capital Corporation Files Pro Forma Financials in Form 8-K/A

MURRIETA, CA--(Marketwire - October 26, 2007) - Franchise Capital Corporation (PINKSHEETS: FCCN) filed a Current Report on Form 8-K/A to provide pro forma financial information related to its recent acquisition of Aero Exhaust, Inc. and adds the report of the company's independent registered public accounting firm regarding the audit of Aero's two-year financial statements. Aero Exhaust is a world leader in performance exhaust airflow technology and NASCAR Performance Partner.

Shane H. Traveller, chief financial officer of Franchise Capital, stated, "The pro-forma financial statements are designed to reflect what the company's financial condition would have looked like had the merger taken place on June 30, 2007. Unfortunately, accounting principles require the recording of certain non-cash items associated with an acquisition of this type, which can skew the operating results and give a potentially misleading view of the company's operations.

"In the case of the share exchange between Aero and Franchise Capital, the exchange rate was negotiated at a time when Franchise Capital's stock price was considerably lower than the price per share on the date we closed the transaction. This resulted in an overstated amount of goodwill being recorded and an overstated amount of settlement cost of debt that was retired through the issuance of stock at the time of the share exchange. We therefore elected to reduce the amount of goodwill to the value of the stock on the date the final share exchange terms were negotiated, since we believe that price represented the fair market value. While this treatment more accurately reflects our asset value, it also resulted in a considerable non-cash loss, which is in no way indicative of the actual operations of the company.

"We anticipate that being able to produce Aero's cat-back kits through the merger with Dr. Gas will allow us to substantially increase the supply and the current demand for Aero products and allow it to achieve break-even cash flow in the near term."

Franchise Capital recently entered into a preliminary agreement with Dr. Gas, Inc. to acquire 100% of the common stock of Dr. Gas, Inc., a producer of the finest racing performance exhaust systems for street and pro-race performance exhaust applications. Dr. Gas produces 90% of all exhaust systems used in NASCAR, Nextel Cup Series, Busch Grand Nationals, Craftsman Truck Series, and many more. In addition to its racing applications, Dr. Gas, Inc. also manufactures for Original Equipment Manufacturers (OEMs) such as Freightliner.

The acquisition of Dr. Gas, Inc. is expected to provide the company with multiple benefits due to its significant synergies with the operations of Aero Exhaust. Once the planned acquisition is consummated, Dr. Gas will contribute to increased revenues and asset valuation for Aero. Possibly even more significant for the business of Aero itself is that Dr. Gas, Inc. is expected to contribute to the growth of Aero through the fabrication of components for Aero products, including recently launched full exhaust systems. Dr. Gas, Inc.'s fabricating capabilities are expected to increase the availability of Aero's new line of full turbo and cat-back systems diesel exhaust systems, referred to in marketing documents as "kits," which include all parts from the catalytic converter, turbo charger or muffler back to the tailpipe. Improved supply will help Aero to meet the demand for its products in the automotive supply market.

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About Dr. Gas, Inc.

Dr. Gas Exhaust Systems produces performance exhaust Xscream® crossover, y-pipe, oval tubing performance exhaust, and h-pipe systems that have changed the performance exhaust sound of NASCAR, IROC, drag racing, and pro-street. Dr. Gas designed and patented the revolutionary Spin Tech racing mufflers. Many standard and custom sizes of mandrel bends and oval tubing are the absolute best for high performance exhaust and ground clearance applications. The company has performance exhaust parts for car, truck, RV, motorcycle, marine, aircraft and industrial applications. At its first NASCAR race, Dr. Gas shocked the sport with its new performance exhaust sound and added power on Sterling Marlin's winning 1995 Daytona 500 racecar. Many of its patented NASCAR performance exhaust systems can be used in street rod performance exhaust applications. For more information on Dr. Gas, Inc., please visit http://www.drgas.com.

About Aero Exhaust:

Aero Exhaust is a world leader in performance exhaust airflow technology, manufacturing and distributing the most technologically advanced muffler on the market. Its product lines are built to the highest industry standards and offer the consumer a lifetime warranty. Aero Exhaust has been issued U.S. and Australian patents on its innovations and development in the exhaust industry, and its mufflers are available worldwide through major retailers, mass merchant centers, automotive aftermarket supply stores and wholesalers. Aero Exhaust mufflers are an exclusive National Association for Stock Car Auto Racing (NASCAR) Performance product and carry the prestigious NASCAR brand on product, packaging and related media. NASCAR legend Rusty Wallace is the official spokesperson for Aero Exhaust products. Additional information on Aero Exhaust's products, race team, and motorsports ventures can be found on its corporate website, www.aeroexhaust.com.

Safe Harbor Statement: The statements in this release that relate to future plans, expectations, events, performance and the like are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Actual results or events could differ materially from those described in the forward-looking statements due to a variety of factors, including the lack of funding, inability to complete required SEC filings, and others set forth in the Company's report on Form 10-K for fiscal year 2007 filed with the Securities and Exchange Commission.

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