U. S. Securities and Exchange Commission

Washington, D.C. 20549



FORM 10-QSB/A
Number 2

(Mark One)





[X]

QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES
EXCHANGE ACT OF 1934



For
the quarterly period ended: September 30, 2004



[
 ]

[
 ]

TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES
EXCHANGE ACT OF 1934



For
the transition period from ____________ to _____________





Commission
File Number:  000-32495



PARAMCO
FINANCIAL GROUP, INC.

(Name
of small business issuer as

specified
in its charter)



|Delaware                              | 88-0441287               
|------------------------------------- | -------------------------
|(State
      or other jurisdiction of | (I.R.S.
      Employer   
|incorporation
      or organization)  | Identification
      No.)





2391
N.E. Loop 410, Suite 130, San Antonio, Texas 78217

(Address
of principal executive offices / Zip Code)



(210)
653-6999

(Issuer's
telephone number)



N/A

(Former
name, former address and former fiscal year, if changed since last report)



Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X] No [ ]



Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:



Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court.  Yes [ ] No [ ]



Applicable only to corporate issuers:



State the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 57,167,560 as November 5, 2004.



Transitional Small Business Disclosure Format (Check One):  Yes ____   No __X__



---



PART I  FINANCIAL INFORMATION



Item 1.

Financial Statements





|PARAMCO FINANCIAL GROUP, INC.         |                             |                                                                                         |                            
|------------------------------------- | --------------------------- | --------------------------------------------------------------------------------------- | ---------------------------
|(A development stage company)         |                             |                                                                                         |                            
|CONSOLIDATED BALANCE SHEET            |                             |                                                                                         |                            
|SEPTEMBER 30, 2004                    |                             |                                                                                         |                            
|(UNAUDITED)                           |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|ASSETS                                |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      | CURRENT ASSETS:             |                                                                                         |                            
|                                      |                             | Cash & cash equivalents                                                                 |                            
|                                      |                             | Fee Receivable                                                                          |                            
|                                      |                             | Deposit                                                                                 |                            
|                                      |                             | Marketable Securities                                                                   |                            
|                                      |                             | Note receivable                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|LIABILITIES AND STOCKHOLDERS' DEFICIT |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      | CURRENT LIABILITIES:        |                                                                                         |                            
|                                      |                             | Accounts payable and accrued expenses                                                   | $                          
|                                      |                             | Notes payable                                                                           |                            
|                                      |                             | Due to Officers                                                                         |                            
|                                      |                             | Convertible notes payable                                                               |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      | COMMITMENTS & CONTINGENCIES |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      | STOCKHOLDERS' DEFICIT:      |                                                                                         |                            
|                                      |                             | Preferred stock - unclassified, $0.001 par value, 5,969,000                             |                            
|                                      |                             | shares authorized, none issued                                                          |                            
|                                      |                             | Preferred Stock - Series A convertible $0.001 par value per share,                      |                            
|                                      |                             | 131,000  shares authorized, 131,000 shares issued                                       |                            
|                                      |                             | Preferred Stock - Series B convertible $0.001 par value per share,                      |                            
|                                      |                             | 3,750,000  shares authorized, none issued                                               |                            
|                                      |                             | Preferred Stock - Series C convertible $0.001 par value per share,                      |                            
|                                      |                             | 150,000  shares authorized, none issued                                                 |                            
|                                      |                             | Common stock, $0.001 par value, 100,000,000 shares authorized,                          |                            
|                                      |                             | 57,067,560 issued, 53,351,160 outstanding                                               |                            
|                                      |                             | Additional paid-in capital                                                              |                            
|                                      |                             | Shares to be issued                                                                     |                            
|                                      |                             | Note receivable - Preferred stock                                                       |                            
|                                      |                             | Accumulated other comprehensive loss                                                    |                            
|                                      |                             | Deficit accumulated during the development stage                                        |                            
|                                      |                             |                                                                                         | Total stockholders' deficit
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             |                                                                                         |                            
|                                      |                             | The accompanying notes are an integral part of these consolidated financial statements. |                            
|                                      |                             |                                                                                         |                            





---





| | PARAMCO FINANCIAL GROUP, INC.                                                                                                                       |  
| | --------------------------------------------------------------------------------------------------------------------------------------------------- | -
| | (A development stage company)                                                                                                                       |  
| | CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                               |  
| | FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003                                                                                     |  
| | AND  THE PERIOD FROM APRIL 22, 1996 (INCEPTION) TO SEPTEMBER 30, 2004                                                                               |  
| | (UNAUDITED)                                                                                                                                         |  
| |                                                                                                                                                     |  
| |                                                                                                                                                     |  
| |                                                                                                                                                     |  
| |                                                                                                                                                     |  
| | Net revenue                                                                                                                                         | $
| |                                                                                                                                                     |  
| | Operating expenses                                                                                                                                  |  
| |                                                                                                                                                     |  
| | Loss from operations                                                                                                                                |  
| |                                                                                                                                                     |  
| | Other income (expense):                                                                                                                             |  
| | Loss on permenant decline of marketable securities                                                                                                  |  
| | Litigation settlement                                                                                                                               |  
| | Recapitalization costs                                                                                                                              |  
| | Interest income                                                                                                                                     |  
| | Miscellenous Expense                                                                                                                                |  
| | Interest expense                                                                                                                                    |  
| | Total other income (expense)                                                                                                                        |  
| |                                                                                                                                                     |  
| | Net loss                                                                                                                                            |  
| |                                                                                                                                                     |  
| | Unrealized loss on marketable securities                                                                                                            |  
| |                                                                                                                                                     |  
| | Comprehensive Loss                                                                                                                                  | $
| |                                                                                                                                                     |  
| | Basic and diluted net loss per share:                                                                                                               | $
| |                                                                                                                                                     |  
| | Basic and diluted weighted average                                                                                                                  |  
| | shares outstanding                                                                                                                                  |  
| |                                                                                                                                                     |  
| | Basic and diluted weighted average shares outstanding have been restated for all the periods in connection with the reorganization on April 8, 2003 |  
| | .                                                                                                                                                   |  
| |                                                                                                                                                     |  
| | The accompanying notes are an integral part of these consolidated financial statements.                                                             |  
| |                                                                                                                                                     |  





---





| | (A development stage company)                                        |                                                      
| | -------------------------------------------------------------------- | -----------------------------------------------------
| | CONSOLIDATED STATEMENTS OF CASH FLOW                                 |                                                      
| | FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003         |                                                      
| | AND THE PERIOD FROM APRIL 22, 1996 (INCEPTION) TO SEPTEMBER 30, 2004 |                                                      
| | (UNAUDITED)                                                          |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| | CASH FLOWS FROM OPERATING ACTIVITIES:                                |                                                      
| |                                                                      | Net loss                                             
| |                                                                      | Adjustments to reconcile net loss to net cash used in
| |                                                                      | operating activities:                                
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      | Total Adjustments                                    
| |                                                                      |                                                      
| |                                                                      |                                                      
| | CASH FLOWS FROM FINANCING ACTIVITIES:                                |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| | CASH FLOWS FROM INVESTING ACTIVITIES                                 |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| | NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS                   | $                                                    
| |                                                                      |                                                      
| | CASH & CASH EQUIVALENTS, BEGINNING BALANCE                           |                                                      
| |                                                                      |                                                      
| | CASH & CASH EQUIVALENTS, ENDING BALANCE                              | $                                                    
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      
| |                                                                      |                                                      



---





PARAMCO FINANCIAL GROUP, INC.

(A development stage company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





Note 1 - Basis of presentation



GENERAL



Paramco Financial Group, Inc.. (the Company) has elected to omit substantially all footnotes to the financial statements for the nine months ended September 30, 2004 since there have been no material changes (other than indicated in other footnotes) to the information previously reported by the Company in their Annual Report filed on the Form 10-KSB for the twelve months ended December 31, 2003.



The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information, but do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.  The audited consolidated financial statements for the year ended December 31, 2003 were filed on April 15, 2004 with the Securities and Exchange Commission and are hereby referenced.



In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine month  periods ended  September 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004.



The accounting policies of the Company are in accordance with generally accepted accounting principles and conform to the standards applicable to development stage companies.  The accompanying Financial Statements have been prepared in accordance with generally accepted accounting principles applicable to development stage
companies.



Reclassifications



Certain comparative amounts have been reclassified to conform to the current year's presentation.





---





PARAMCO FINANCIAL GROUP, INC.

(A development stage company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





OTHER FOOTNOTES



Due to officers

This includes $32,000 represented by a short-term, non interest bearing loan due on demand and an aggregate of $1,168,767 due to the officers as compensation, of which $221,476 and $664,589 was earned in the three and nine month periods ended September 30, 2004, respectively.





Common Stock Transactions

During the period ended September 30, 2004 the Company had the following common stock transactions:



o

Issued 15,611,100 shares of common stock for services valued at $2,126,567.



o

Cancelled 2,800,000 shares of common stock issued for services valued at $445,000.



o

Contracted to issue 1,442,492 shares of common stock in exchange for services valued at $48,000.



o

Contracted to issue 100,000 shares of common stock for $12,000 cash received.



o

Wrote off $434,500 of Unamortized Consulting Fees as a result of termination of consulting contract.



o

Received $53,180 for 279,500 shares of common stock issued in 2003 and the period ended March 31, 2004.



o

Cancelled 1,500,000 shares of common stock issued for a Note Receivable of $75,000





---





Supplemental disclosure of cash flows



The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95.



The Company paid $0 for income tax during the three and nine month periods ended September 30, 2004.



Going concern



These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.  As of September 30, 2004, the Company has accumulated operating losses of $10,888,025 since inception, including a net loss of $3,267,088 for the nine month period ended September 30, 2004. The Company's ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations.  Management plans to raise equity capital to finance the operating and capital requirements of the Company.  Amounts raised will be used for further development of the Company's products, to provide financing for marketing and promotion, to secure additional property and equipment, and for other working capital purposes. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations.



Joint Venture



In July the Company entered into a Joint Venture Agreement with New Business Network, Inc. (NBN) to form a Texas Limited Liability Company to market the services of NBN in Texas.  The Agreement provides, among other things, that the Company will be paid an initial payment of $30,000 for making available its capital sources and facilities for providing financial guarantees and enhancements utilizing securities issued by the Company.  The Company will acquire 30% interest in the Joint Venture in exchange for One Million shares (1,000,000) of Series B Convertible Preferred.  Such shares shall be used to enhance or secure access to capital for the benefit of the Joint Venture.  As of September 30, 2004 the Series B Convertible Preferred shares have not be issued   Such shares were approved, but have not been issued as of the date of this Quarterly Report.



State of Colorado Investigation



On August 30, 2004 the Company received a Subpoena Duces Tecum from the State of Colorado Department of Regulatory Agencies, Division of Securities.  The Subpoena requires the company to furnish certain information from October 1, 2001 to the present in connection with the sale of the PFGL High Yield Redeemable Convertible Debenture Program.  The Company furnished the information requested by the Division of Securities and intends to retain counsel to represent the Company and its Officers.  The Division of Securities has not requested anything further nor informed the Company of any action.



---





Item 2.

Managements Discussion and Analysis or Plan of Operation



Forward-Looking Statements



This Quarterly Report for Paramco Financial Group, Inc. (the Company) contains forward-looking statements about our business, financial condition and prospects that reflect managements assumptions and beliefs based on information currently available.  We can give no assurance that the expectations indicated by such forward-looking statements will be realized.  If any of our managements assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements.



The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, managements ability to raise capital in the future, the retention of key employees, intense competition in our industry, changes in the regulation of our industry, seasonality of quarterly results, general economic downturns, and other risks detailed from time to time in the Companys filings with the Securities and Exchange (the SEC).



There may be other risks and circumstances that management may be unable to predict.  When used in this Quarterly Report, words such as, believes, expects, intends, plans, anticipates, estimates and similar expressions are intended to identify forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934, although there may be certain forward-looking statements not accompanied by such expressions.



Readers are urged to carefully review and consider the various disclosures made by the Company in this Quarterly Report, as an attempt to advise interested parties of the risks and factors that my affect the Companys business, financial conditions, and results of operations and prospects.



Recent Changes in Business Strategy, Change in Control and Change in Corporate Structure



As disclosed in our Current Report on Form 8-K dated September 15, 2004, which was filed with the Securities and Exchange Commission on September 24, 2004, on September 9, 2004 George Betts resigned as Chief Financial Officer and Director and Mike Roth resigned as Secretary and Director.



---



As disclosed in our Current Report on Form 8-K dated October 13, 2004, which was filed with the Securities and Exchange Commission on October 21, 2004, on October 8, 2004 at a meeting of the Companys Board of Directors the following changes were made in the Corporate structure.



o

Paul Sidey resigned as President and CEO.



o

Douglas Gregg was appointed as President and CEO



o

Michael S. Goodlett, Sr. was elected as a Director and appointed as Secretary/Treasurer of the Company



o

Michael Reyna was elected as a Director and appointed as Senior V.P. of Operations



In the same Current Report it was disclosed that on October 13, 2004 Paul Sidey resigned as a Director.



On November 3, 2004 the Company filed a Certificate of Designation with the Delaware Secretary of State to authorize the issuance of 5,000,000 shares of Series D Preferred Stock with a par value of $.001. These shares are Redeemable and Convertible into Common Stock under certain conditions.  A copy of the Certificate of Designation was included as Exhibit 3.1.1 to the Current Report on Form 8-K, which was filed with the Securities and Exchange Commission on November 11, 2004.  As of the date of this Current Report none of the shares of Series D Preferred Stock have been issued.



Our Companys common stock is quoted on the OTC Bulletin Board under the symbol PFDE.



Results of Operations



Results of Operations



Operations for the nine months ended September 30, 2004, as compared to the nine months ended September 30, 2003.



Revenues



The Company had net revenue of $46,000 during the nine months ended September 30, 2004.  $30,000 was for Fees earned from the Joint Venture with New Business Network, Inc. and $16,000 resulting from a reimbursement of unspecified expenses by a consultant resulting from investigation of possible acquisitions. There was no revenue for the nine months ended September 30, 2003 due to restructuring and changing the focus of the business.



---



Expenses



Operating expenses for the nine months ended September 30, 2004, were $3,097,523 compared to $2,570,462 in 2003.  This represents an increase of $527,061 or 20%, in operating expenses from the comparable period ended September 30, 2003. Total expenses, including operating expenses, net interest and unrealized loss on marketable securities for the nine months ended September 30, 2004 were $3,313,088. This represents an increase of $598,548, or 22%, from the comparable period ended September 30, 2003, when we reported total expenses of $2,714540. Most of the increase in operating expenses is attributable to a write off of $434,500  of unamortized consulting fee from the termination of the contract and a Unrealized loss on Marketable Securities of $75,391.



Net Profit (Loss)



During the three and nine months ended September 30, 2004, our loss per share was $.01 and $.13 compared to $.03 and $.23 per share for the respective periods in 2003.



Liquidity and Capital Resources



In the nine months ended September 30, 2004, net cash of $121,966 was used by operating activities, as compared to the prior period, when operating activities used $583,804.  During the nine months ended September 30, 2004 financing activities provided net cash of $125,180, as compared to $565,906 provided in the prior period.  The cash provided by financing during 2004 came from cash advances from an officer of $32,000, sale of common stock of $53,180 and payments on a note receivable for stock of $40,000.  During 2003 the cash came from the sale of promissory notes of $78,943, proceeds from issuance of debentures of $461,963 and proceeds from exercising warrants of $25,000.



As of the end of our third quarter on September 30, 2004, we had $3,214 of cash available.  Our management believes that to meet our needs for our 2004 fiscal year the Company requires immediate proceeds from debt or equity financing to provide it with working capital adequate to proceed with its proposed acquisitions and to go forward with its plan of operations. Since our inception on, April 22,1996 we have incurred an accumulated deficit of $10,888,025.



As September 30, 2004 we are in default on all interest payments to the holders of Notes payable and Convertible Notes payable totaling $1,499,398.  No interest payments have been made since April 1, 2004 and at September 30, 2004 the accrued interest due the Note Holders was $106,317.





---



As a result of these factors, the Company's independent auditors issued their audit report for the fiscal year ended December 31, 2003 and 2002, with a going concern opinion: This raises substantial doubt about its ability to continue as a going concern.  None of the factors addressed by the Company's independent auditors has been mitigated and the going concern issues remain.   We intend for the Company to seek private equity and/or debt capital to initiate possible mergers, acquisitions or Joint Ventures.   There can be no assurances that any such capital will be available on terms acceptable to us, or at all.  However, management believes that the new focus of our business on the financial services sector will enable us to acquire existing businesses in that sector and to utilize these acquisitions in an effort to raise the capital necessary to resolve these going concern issues.



Recent Accounting Pronouncements



On  April 30, 2003, the Financial Accounting Standards Board (FASB) issued FASB Statement  No. 149 (SFAS 149"), Amendment of Statement 133 on Derivative Instruments  and Hedging Activities. SFAS 149 amends and clarifies the accounting guidance on (1)   derivative instruments   (including   certain derivative   instruments embedded in other contracts) and (2) hedging activities that fall within the scope of FASB Statement No.  133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities.  SFAS 149 also amends certain other existing pronouncements,   which will result in more   consistent reporting of contracts that are derivatives in   their entirety or that contain embedded derivatives that warrant separate accounting. SFAS 149 is effective (1) for contracts entered into or modified after June 30, 2003, with certain exceptions, and (2) for hedging relationships designated after June 30, 2003.  The guidance is to be applied prospectively. The adoption of SFAS No. 149 does not have a

material impact on the Companys financial position or results of operations or cash flows.



On  May 15 2003, the FASB issued FASB Statement No. 150 (SFAS  150), Accounting for Certain Financial  Instruments with  Characteristics of both Liabilities and  Equity.  SFAS 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or mezzanine equity, by now requiring those instruments to be   classified   as   liabilities  (or   assets   in   some circumstances)  in  the  statement  of  financial  position.  Further, SFAS 150 requires disclosure regarding the terms of those instruments and settlement alternatives.  SFAS 150 affects an entity's  classification  of  the   following freestanding   instruments:   a)   Mandatorily    redeemable instruments  b)  Financial  instruments  to  repurchase   an entity's  own  equity  instruments c) Financial  instruments embodying  obligations that the issuer must or could  choose to  settle  by  issuing a variable number of its  shares  or other  equity  instruments  based  solely  on  (i)  a  fixed monetary  amount known at inception or (ii) something  other than  changes in its own equity instruments d) SFAS 150 does not  apply  to  features embedded in a financial  instrument that  is  not a derivative in its entirety.  The guidance in SFAS 150 is  generally  effective  for  all   financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. For private companies, mandatorily redeemable financial instruments are subject to the provisions of SFAS 150 for the fiscal period  beginning after  December 15, 2003. The adoption of SFAS No. 149 does not have a material  impact on  the  Company's  financial position or results of operations or cash flows.



---



In December 2003, FASB issued a revised Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46R). FIN 46R addresses consolidation by business enterprises of variable interest entities and significantly changes the consolidation application of consolidation policies to variable interest entities and, thus improves comparability between enterprises engaged in similar activities when those activities are conducted through variable interest entities. The Company does not hold any variable interest entities.





Item 3.

Controls and Procedures



Quarterly evaluation of the company's Disclosure Controls and Internal Controls.



Within the 90 days prior to the date of this Quarterly Report on Form 10-QSB, the company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (Disclosure Controls), and its internal controls and procedures for financial reporting (Internal Controls). This evaluation (the Controls Evaluation) was done under the supervision and with the participation of management, including our Chief Executive Officer (CEO) and Acting Chief Financial Officer (CFO). Rules adopted by the SEC require that in this section of the Quarterly Report we present the conclusions of the CEO and the CFO about the effectiveness of our Disclosure Controls and Internal Controls based on and as of the date of the Controls Evaluation.



CEO and CFO Certifications.



Appearing immediately following the Signatures section of this Quarterly Report there is form of Certification of the CEO and the CFO. This Certification is required in accord with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certification). This section of the Quarterly Report which you are currently reading is the information concerning the Controls Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.



Disclosure Controls and Internal Controls.



Disclosure Controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (Exchange Act), such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's (SEC) rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting principles.



---





Limitations on the Effectiveness of Controls.



The company's management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



Scope of the Controls Evaluation.



The CEO/CFO evaluation of our Disclosure Controls and our Internal Controls included a review of the controls' objectives and design, the controls' implementation by the company and the effect of the controls on the information generated for use in this Quarterly Report. In the course of the Controls Evaluation, we sought to identify data errors, controls problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were being undertaken. This type of evaluation will be done on a quarterly basis so that the conclusions concerning controls effectiveness can be reported in our Quarterly Reports on Form 10-QSB and Annual Report on Form 10-KSB. Our Internal Controls are also evaluated on an ongoing basis by other personnel in our organization and by our independent auditors in connection with their audit and review activities. The overall goals of these various evaluation activities are to monitor our Disclosure Controls and our Internal Controls and to make modifications as necessary; our intent in this regard is that the Disclosure Controls and the Internal Controls will be maintained as dynamic systems that change (including with improvements and corrections) as conditions warrant. Among other matters, we sought in our evaluation to determine whether there were any significant deficiencies or material weaknesses in the company's Internal Controls, or whether the company had identified any acts of fraud involving personnel who have a significant role in the company's Internal Controls. This information was important both for the Controls Evaluation generally and because items 5 and 6 in the Section 302 Certifications of the CEO and CFO require that the CEO and CFO disclose that information to our Board's Audit Committee (or persons performing the equivalent functions) and to our independent auditors and to report on related matters in this section of the Quarterly Report. In the professional auditing literature, significant deficiencies are referred to as reportable conditions; these are control issues that could have a significant adverse effect on the ability to record, process, summarize and report financial data in the financial statements. A material weakness is defined in the auditing literature as a particularly serious reportable condition where the internal control does not reduce to a relatively low level the risk that misstatements caused by error or fraud may occur in amounts that would be material in relation to the financial statements and not be detected within a timely period by employees in the normal course of performing their assigned functions. We also sought to deal with other controls matters in the Controls Evaluation, and in each case if a problem was identified, we considered what revision, improvement and/or correction to make in accord with our on-going procedures.



---



In accord with SEC requirements, the CEO and CFO note that, since the date of the Controls Evaluation to the date of this Quarterly Report, there have been no significant changes in Internal Controls or in other factors that could significantly affect Internal Controls, including any corrective actions with regard to significant deficiencies and material weaknesses.



Conclusions.



Based upon the Controls Evaluation, our CEO and CFO have concluded that, subject to the limitations noted above, our Disclosure Controls are effective to ensure that material information relating to the Company and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared, and that our Internal Controls are effective to provide reasonable assurance that our financial statements are fairly presented in conformity with generally accepted accounting principles.





PART II - OTHER INFORMATION



Item 1.
Legal Proceedings



In the matter of the lawsuit styled Arthur Hall vs. Paramco Financial Group, Inc., District Court of Denver County, State of Colorado, Case No. 03 CV 2874 (previously discussed in the Companys Quarterly Report on Form 10-QSB, Part II, Item 1 thereof, which was filed with the Securities and Exchange Commission on August 19, 2003), the Company and the plaintiff entered into a settlement agreement in October 2003.  Based upon the inability of the Company to fully comply with the terms of the settlement agreement, in March 2004, a stipulated judgment was entered against the Company and in favor of the plaintiff in the amount of $152,500.



On August 30, 2004 the Company received a Subpoena Duces Tecum from the State of Colorado Department of Regulatory Agencies, Division of Securities.  The Subpoena requires the company to furnish certain information from October 1, 2001 to the present  in connection with the sale of  the PFGL High Yield Redeemable Convertible Debenture Program.  The Company furnished the information requested by the Division of Securities and intends to retain counsel to represent the Company and its Officers.  The Division of Securities has not requested anything further nor informed the Company of any other proposed or pending action.



Other than the litigation described in the preceding paragraph, the Company is unaware of any pending or threatened litigation, which might have a material effect on the Company or its business.



---





Item 2.

Change in Securities and Use of Proceeds



During the three months ended September 30, 2004, no actions were taken by the Company with respect to the Common Stock of the Company nor any other class of security of the Company which would effect the rights of the holders of our Common Stock.



During the three months ended September 30, 2004, we did not issue any securities that have not been registered under the Securities Act of 1933.



The Company has not paid any dividends on its Common Stock and does not expect to do so in the foreseeable future.  The Company intends to apply its earnings, if any, in expanding its operations and related activities.  The payment of cash dividends in the future will be at the discretion of the Board of Directors and will depend upon such factors as earnings levels, capital requirements, the Companys financial condition and other factors deemed relevant by the Board of Directors.  Further, payment of cash dividends on our common stock is also subject to the approval of the holders of our Series A Preferred Stock.  In addition, the Companys ability to pay dividends may be limited under future loan agreements of the Company which restrict or prohibit the payment of dividends.



Item 3.

Default Upon Senior Securities



As of September 30, 2004 the Company is in default on all interest payments to the holders of Notes payable and Convertible Notes payable totaling $1,499,398.  No interest payments have been made since April 1, 2004 and at September 30, 2004 the accrued interest due the Note Holders was $106,317.



Item 4.

Submission of Matter to a Vote of Security Holders



Not applicable.



Item 5.

Other Information



(a)

Not applicable.



(b)

During the period covered by this report there were no material changes in the procedures by which security holders may recommend nominees to the Board of Directors.





---





Item
6.

Exhibits
and Reports on Form 8-K





(a)

Exhibits:



|Exhibit
      Number | Description                                                                                                                            
|-------------------- | ---------------------------------------------------------------------------------------------------------------------------------------
|                     |                                                                                                                                        
|15                   | Report of Independent Registered
      Public Accounting Firm, Clyde Baily, P.C., dated January 18, 2005.                              
|                     |                                                                                                                                        
|31.1                 | Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of R. Michael
      Reyna, as Chief Executive Officer.   
|                     |                                                                                                                                        
|31.2                 | Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Douglas G.
      Gregg, as Chief Financial Officer.   
|                     |                                                                                                                                        
|32.1                 | *
       Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002 of R. Michael Reyna, as Chief Executive Officer.
|                     |                                                                                                                                        
|32.2                 | *
       Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002 of terrence Riely, as Chief Financial Officer.  
|                     |                                                                                                                                        



(b)   
Reports on Form 8-K.



No
Current Reports on Form 8-K were by the Company during the three months ended
June 30, 2004.



*
This certification shall not be deemed "filed" for purposes of Section 18 of
the Securities Exchange Act of 1934,or otherwise subject to the liability of
that section nor shall it be deemed to be incorporated by reference to any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.



---



SIGNATURES



In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





Registrant:
PARAMCO FINANCIAL GROUP, INC.





By:/s/ R. Michael Reyna

R.
Michael Reyna

President
and

Chief
Executive Officer



In
connection with the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.





Date:
January 19, 2005                                           
/s/ R. Michael Reyna

R. Michael Reyna

Director, President and Chief Executive Officer





Date:
January 19, 2005                                           
/s/ Terrence Riely

Terrence Riely

Chairman of the Board, Chief Financial Officer

and Principal Accounting Officer





Date:
January 19, 2005                                           
/s/ Michael S. Goodlett, Sr.

Michael S. Goodlett, Sr.

Director and Secretary