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


                                   FORM 10-QSB


          QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934


                  For the quarterly period ended June 30, 2004



                         Commission File Number 0-29049

                            SILVERADO FINANCIAL, INC.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)





              Nevada                                86-0824125
--------------------------------------------------------------------------------
 (State or other jurisdiction of                   (IRS Employer
  incorporation or organization)              Identification Number)




      5976 W. Las Positas, Suite 112, Pleasanton, CA               94588
--------------------------------------------------------------------------------
         (Address of principal executive offices)                (Zip Code)




                        Telephone Number: (925) 227-1500



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during the  preceding  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 [ ]

As of August 1, 2004,  19,376,770 of the  registrant's  common stock,  $0.01 par
value per share, were issued and outstanding.



                                       1
<PAGE>


                            SILVERADO FINANCIAL, INC.
                              INDEX TO FORM 10-QSB


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements ............................................... 3

        Consolidated Balance Sheet as of June 30, 2004 ..................... 3

        Consolidated  Statements  of  Operations  for the  three  and six
        months ended June 30, 2004 and 2003 ................................ 4

        Consolidated  Statements  of Cash  Flows  for the  three  and six
        months ended June 30, 2004 and 2003 ................................ 5

        Notes to Financial Statements ...................................... 6

Item 2. Management's Plan of Operation .....................................12

Item 3. Controls and Procedures ............................................27

PART II. OTHER INFORMATION

Item 1. Legal Proceedings ..................................................28

Item 2. Changes in Securities ..............................................29

Item 3. Defaults Upon Senior Securities ....................................30

Item 4. Submissions of Matters to a Vote of Security Holders ...............30

Item 5. Other Information ..................................................30

Item 6. Exhibits and Reports on Form 8-K ...................................30

Signatures .................................................................31

                                       2
<PAGE>


PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                      SILVERADO FINANCIAL, INC.
                                     CONSOLIDATED BALANCE SHEET
                                          AT JUNE 30, 2004
                                             (Unaudited)

                                     ASSETS
                                     ------
CURRENT ASSETS
   Cash                                                              $ 42,446
   Receivables                                                          3,003
                                                            -----------------
   Total Current Assets                                                45,449

OTHER ASSETS
   Intellectual property                                            1,398,020
   Furniture, fixtures & equipment, net                               114,542
   Other                                                               11,547
                                                            -----------------

Total assets                                                      $ 1,569,558
                                                            =================

                       LIABILITIES & STOCKHOLDERS' EQUITY
                       ----------------------------------
LIABILITIES
CURRENT
   Accounts payable and accrued expenses                            $ 273,572
   Accrued officer salaries                                            84,980
   Accrued interest                                                    40,833
   Due to affiliates                                                      939
                                                            -----------------
Total current liabilities                                             400,324

OTHER LIABILITIES
   Convertible notes payable                                           36,000
   Note payable                                                       275,000
                                                            -----------------
Total liabilities                                                     711,324

STOCKHOLDERS' EQUITY

 Preferred stock, $.001 par value,
   5,000,000 shares authorized, none issued
Common stock, $.001 par value, 20,000,000 shares                     $ 17,377
   authorized, 19,376,770 issued and outstanding
Additional paid-in capital                                         10,816,749
Deferred Stock Compensation                                           (18,130)
Accumulated Deficit                                                (9,957,762)
                                                            -----------------

Total stockholders' equity                                            858,234
                                                            -----------------

Total liabilities and stockholders' equity                        $ 1,569,558
                                                            =================

                 See accompanying notes to these consolidated financial
statements.


                                       3
<PAGE>



                            SILVERADO FINANCIAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<table>
<caption>
                                     For the three months ended   For the six months ended
                                               June 30,                    June 30,
                                         2004          2,003           2004         2,003
                                     ------------- ------------- ------------- -------------
<S>                                       <C>            <C>            <C>          <C>
Revenues
 Commission & processing revenue         $ 204,098      $ 17,825     $ 312,783      $ 17,825
                                     ------------- ------------- ------------- -------------

Operating expenses
 Sales expenses and commissions            155,238             -       235,458             -
 Consulting                                 66,080        50,118       148,581       171,418
 Interest expense                            6,383         6,226        12,765        12,294
 Depreciation expense                        7,114         4,570        13,828         4,729
 Other general and administrative          164,030       179,168       309,186       245,829
                                     ------------- ------------- ------------- -------------
 Total operating expenses                  398,845       240,082       719,818       434,270
                                     ------------- ------------- ------------- -------------

Net (Loss) from operations                (194,747)     (222,257)     (407,035)     (416,445)

 Other income and expense                        -             9             -             9
 (Loss)  gain on sale of investments             -           153         9,813        (6,201)
                                     ------------- ------------- ------------- -------------
 Net (Loss)                             $ (194,747)   $ (222,095)   $ (397,222)   $ (422,637)
                                    ============== ============= ============= =============

NET (LOSS) PER SHARE:
  Basic & Diluted                            (0.02)        (0.02)        (0.02)        (0.04)
                                    ============== ============= ============= =============

WEIGHTED AVERAGE SHARES OUTSTANDING:
  Basic & Diluted                       16,604,781    11,356,524    16,405,191    11,178,875
                                    ============== ============= ============= =============
</table>
                                 See accompanying notes to these consolidated
financial statements.


                                       4
<PAGE>



                            SILVERADO FINANCIAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)
<table>
<caption>

                                                             For the three months ended       For the six months ended
                                                                      June 30,                          June 30,
                                                               2004              2003            2004             2003
                                                        ---------------- ---------------- ---------------- ----------------
<S>                                                             <C>               <C>             <C>              <C>
OPERATING ACTIVITIES

  Net loss for the period                                     $ (194,748)      $ (222,095)      $ (397,222)      $ (422,637)
   Adjustments to reconcile net loss to net cash
       (used in) provided by operating activities:
        Depreciation and amortization expense                     18,014            4,570           31,698            4,729
        Loss (gain) on sale of marketable securities                   -             (153)          (9,813)           6,201
        Common stock issued for services                          72,932          112,019          135,873          198,519
        Common stock issued for payables and debt                 41,614          174,051          135,551          174,051
        Common stock issued for Realty Capital
            Corporation                                                -          127,654                -          127,654
   Changes in assets and liabilities
       (Increase)/decrease  in accounts receivable                   (46)          17,427            8,402           (1,750)
       (Increase)/decrease  in furniture, fixtures
            & equipment                                                -         (134,271)               -         (134,271)
       (Increase)/decrease  in other assets                       (1,433)               -           (4,647)               -
        Increase/(decrease) in accounts payable
            and accrued expenses                                   4,813          (93,403)          28,753           33,206
        Increase/(decrease) in accrued officer salaries           66,640                -           24,980                -
        Increase/(decrease) in accrued interest                    6,381            5,425           12,764           11,491
        Increase/(decrease) in note payable                            -            3,500                -            3,500
                                                        ---------------- ---------------- ---------------- ----------------
            Net cash (used in) provided by operating
               activities                                         14,167           (5,276)         (33,661)             693
                                                        ---------------- ---------------- ---------------- ----------------

FINANCING ACTIVITIES
  Net advances (to) from affiliates                              (13,500)           3,000          (13,061)         (10,000)
  Proceeds from private placements                                17,000                -           72,350                -
                                                        ---------------- ---------------- ---------------- ----------------
            Net cash (used in) provided by
               financing activities                                3,500            3,000           59,289          (10,000)
                                                        ---------------- ---------------- ---------------- ----------------

INVESTING ACTIVITIES
  Proceeds from sale of marketable securities                          -            2,854           27,588           10,275
  Purchase of office equipment                                   (12,000)               -          (12,000)               -
                                                        ---------------- ---------------- ---------------- ----------------
            Net cash (used in) provided by
               investing activities                              (12,000)           2,854           15,588           10,275
                                                        ---------------- ---------------- ---------------- ----------------

INCREASE IN CASH                                                   5,667              578           41,216              968

CASH, BEGINNING OF PERIOD                                         36,779              951            1,230              561
                                                        ---------------- ---------------- ---------------- ----------------
CASH, END OF PERIOD                                             $ 42,446          $ 1,529         $ 42,446          $ 1,529
                                                        ================ ================ ================ ================

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES

  Cancellation of 62,000 common shares in sale of intellectual
    property and Rockford shares                                       -                -                -          (16,684)
                                                         =============== ================ ================ ================
</table>
       See accompanying notes to these consolidated financial statements.


                                       5
<PAGE>


                            SILVERADO FINANCIAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        THREE MONTHS ENDED MARCH 31, 2004

Note 1 - ORGANIZATION AND BASIS OF PRESENTATION

The  unaudited  financial  statements  included  herein were  prepared  from the
records  of  the  Company  in  accordance  with  Generally  Accepted  Accounting
Principles. These financial statements reflect all adjustments which are, in the
opinion of  management,  necessary to provide a fair statement of the results of
operations  and  financial  position  for the interim  periods.  Such  financial
statements  generally  conform to the presentation  reflected in our Form 10-KSB
filed with the  Securities  and Exchange  Commission for the year ended December
31,  2003 and Form  10-QSB for the quarter  ended  March 31,  2004.  The current
interim  period  reported  herein  should be read in  conjunction  with our Form
10-KSB subject to independent audit at the end of the year.

A majority of the shareholders of record on February 10, 2003 voted to amend the
Articles of Incorporation of the Registrant to change the name of the Company to
Silverado  Financial,  Inc.  and to  change  the  authorized  common  shares  to
100,000,000 and the authorized  preferred shares to 5,000,000 as described in an
information  statement  filed  on Form  14C with  the  Securities  and  Exchange
Commission  on February 11, 2003.  The  Registrant  filed with the  Secretary of
State of Nevada a Certificate of Amended  Articles of Incorporation on March 21,
2003.  Subsequently,  on April  29,  2003 the  Company  effected  a one for five
reversal of its authorized and outstanding common shares. See Note 2 below.

As shown in the accompanying financial statements, the Company had a net loss of
$194,747  for the three  months  ended  June 30,  2004 and a deficit  in working
capital  of  approximately  $354,875  as of June 30,  2004.  The  ability of the
Company to continue as a going  concern is  dependent  on  obtaining  additional
capital and financing and operating at a profitable  level.  The Company intends
to seek  additional  capital  either  through  debt or  equity  offerings,  or a
combination  thereof,  and to seek acquisitions which will generate sales volume
with  operating  margins  sufficient  to achieve  profitability.  The  financial
statements  do not  include any  adjustments  that might be  necessary  if it is
unable to continue as a going concern.  The independent  auditor's report on the
financial statements for the year ended December 31, 2003 expressed  substantial
doubt  about the ability of the  Company to  continue  as a  going-concern.  The
results  of  operations  for the  three  months  ended  June  30,  2004  are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2004.

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

RESTATEMENT OF SHARE AMOUNTS

Effective  April 29,  2003 we changed our  trading  name and  trading  symbol to
"SLVO" on the OTCBB and decreased the number of issued and outstanding shares of
common stock by issuing one new share for each five shares held. This action was
authorized by the board of directors at a meeting of the board on April 3, 2003.

CONSOLIDATION

The consolidated financial statements include the results of operations, account
balances and cash flows of the Company and our wholly owned  subsidiaries  after
elimination of inter-company transactions. The operations of Silverado Financial
Mortgage,  formerly Realty Capital  Corporation and Financial  Software Inc. are
consolidated from their respective acquisition dates of May 9, 2003 and November
15, 2002..

                                       6
<PAGE>

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

USE OF ESTIMATES

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

CASH

Cash  includes  all  short-term  highly  liquid  investments  that  are  readily
convertible  to known  amounts  of cash and have  original  maturities  of three
months or less. At times cash deposits may exceed government insured limits.


PROPERTY AND EQUIPMENT

Property and equipment consists of computer  equipment,  office furniture and is
stated at cost less  accumulated  depreciation.  Depreciation  is  recorded on a
straight-line  basis  the  estimated  useful  lives  of the  assets  at 5 years.
Depreciation  expenses for the quarter and six months ended June 30, 2004 were $
7,114 and $13,828, respectively.  Accumulated depreciation for the quarter ended
June 30, 2004 was $31,729.

REVENUE RECOGNITION

Commissions generated from brokering loans are recognized at the date of close.

FINANCIAL INSTRUMENTS

Financial  instruments  consist  primarily of cash,  receivables and obligations
under  accounts  payable and accrued  expenses.  The  carrying  amounts of cash,
accounts  receivable,  accounts  payable,  notes  payable and  accrued  expenses
approximate fair value because of the short term maturity of those instruments.

INTELLECTUAL PROPERTY

Our intellectual  property is comprised of a software platform acquired with the
acquisition of Financial  Services Inc. in 2002. We  periodically  evaluates the
recoverability   of  intangible   assets  and  takes  into  account   events  or
circumstances  that warrant  revised  estimates of useful lives or that indicate
that impairment  exists.  Our intangible  assets will be subject to amortization
when put into productive use.

IMPAIRMENT OF LONG-LIVED ASSETS

In the event that facts and  circumstances  indicate that the cost of long-lived
assets, primarily intellectual property and patents, may be impaired, we perform
a  recoverability  evaluation.  If an  evaluation  is required,  the  discounted
estimated  future  cash flows  associated  with the assets are  compared  to the
assets'  carrying  amount to  determine  whether a  write-down  to fair value is
required.

On January 1, 2002, we adopted SFAS No. 144  "Accounting  for the  Impairment or
Disposal of Long-Lived  Assets" which requires that long-lived assets to be held
and used be reviewed for impairment  whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.

                                       7
<PAGE>

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

We  evaluate  its  long-lived   assets  for  impairment   whenever   changes  in
circumstances  indicate  that  the  carrying  amount  of the  asset  may  not be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying amount of an asset to future  undiscounted cash flows
expected to be generated by the asset.  If assets are considered to be impaired,
the  impairment to be recognized is measured by the amount by which the carrying
amounts  exceed the fair  values of the  assets.  Assets to be  disposed  of are
reported at the lower of carrying values or fair values, less costs of disposal.

STOCK-BASED COMPENSATION

Statement of  Financial  Accounting  Standard  (SFAS) No. 123,  "Accounting  for
Stock-Based  Compensation",  ("SFAS 123") as amended by SFAS No. 148 "Accounting
for  Stock-Based   Compensation  -  Transition  and   Disclosure",   established
accounting  and  disclosure  requirements  using a  fair-value  based  method of
accounting for stock-based employee compensation. We have no outstanding options
to  consultants  or  members  of  the  Board  of  Directors.   The  Company  may
periodically  issue  restricted  common  shares in advance of their being earned
which result in the recording the unearned amount as deferred compensation. When
the shares are subsequently earned, the Company records amortization expense for
the amount earned.

INCOME TAXES

We have adopted the provisions of SFAS No. 109,  "Accounting  for Income Taxes".
SFAS 109 requires  recognition  of deferred tax  liabilities  and assets for the
expected  future  tax  consequences  of events  that have been  included  in the
consolidated  financial statements or tax returns.  Under this method,  deferred
tax  liabilities and assets are determined  based on the difference  between the
financial  statement and tax basis of assets and  liabilities  using enacted tax
rates in effect for the year in which the differences are expected to reverse.

LOSS PER SHARE

(Loss) per common  share is computed  based on the  weighted  average  number of
common shares  outstanding  during each period.  Convertible  equity instruments
such as convertible debentures,  warrants and escrowed shares are not considered
in  the  calculation  of net  loss  per  share,  as  their  inclusion  would  be
antidilutive.

Note 3 - INTELLECTUAL PROPERTY

Since its  inception,  we have entered into  numerous  agreements as a result of
having  acquired  certain  rights to  various  complex  intellectual  scientific
properties.  On November 19, 2002 we acquired intellectual property comprised of
a software platform acquired with Financial Services Inc. during 2002.

During the quarter ended June 30, 2003, in a non-arms  length  transaction  with
Robert George Krushnisky,  a director of the company,  we received 62,000 shares
of its own common stock together with cancellation of an outstanding debt in the
amount of $1,100 in exchange  for all of the  scientific  intellectual  property
assets  acquired prior to the  acquisition of FSI in November of 2002 as well as
all shares of Rockford Technology held for sale by the company.

We periodically analyze its investment in intellectual  property for impairment.
The  stages  of  development  in  which  the  intellectual  property  is in make
estimation of value or  determination  of impairment a difficult task. There has
been no  substantive  revenues  generated or value  derived from the  technology


                                       8
<PAGE>

INTELLECTUAL PROPERTY - continued

since its  acquisition.  We have  determined  that there is no evidence that the
book value of the intellectual property is impaired until it has been determined
that there is no likely commercial application or one that will produce adequate
cash flow to support those values.

On November 19, 2002, in connection with the acquisition of Financial  Software,
Inc., we acquired certain  software,  web sites and intellectual  property which
can aggregate  financial  information  from a large number of data sources on an
individual basis,  amalgamate the data and provide accurate and detailed insight
into an  individual's  personal  financial  picture on a real time  basis.  This
software can manage a host of disparate  objectives  as they relate to a persons
financial  goals,  be they investment or debt related or any  combination.  This
software  suite,  together with mortgage  generation  capabilities  can create a
variety of new and  different  mortgage,  investment or insurance  products.  We
recorded  the  software on its books at the  seller's  basis of  $1,398,020.  We
engaged an  experienced  software  developer  based in Palo Alto,  California to
perform an  independent,  third party  valuation of the software during 2003. We
anticipate  putting the software into service  during the fourth quarter of 2004
and intend to amortize the software over a three year period commencing upon the
in-service  date.  Estimated  amortization  expense on this intangible  asset is
estimated to be as follows for the years December 31:

                          2004                $ 116,505
                          2005                  466,000
                          2006                  466,000
                          2007                  349,515
                         ------------    --------------
                          Total             $ 1,398,020
                         ============    ==============

Note 4 - ACCOUNTS AND NOTES PAYABLE

Accounts Payable

We owe our vendors a total of $254,328 of which $238,957 is outstanding payables
over ninety days.

Notes Payable

As part of the acquisition of Financial Services  Software,  we became obligated
under a note for  $275,000  at 8% per annum,  payable  monthly,  in arrears  and
amortized over eighteen equal  installments  of $16,258.  Principal and interest
payments  due under the note will not be paid  until we have  raised  sufficient
capital through the sale of stock and /or notes to raise a minimum of four times
the monthly payment due. Further,  additional  monthly payments are abated until
we are able to  maintain  sufficient  capital  to allow it to  remain  cash flow
positive and continue  making the payments.  There was $35,501 of accrued unpaid
interest at June 30, 2004.

Convertible Notes payable

We have  three  convertible  notes  payable  totaling  $36,000  at 10% per annum
maturing during 2004 as a result of our extensions of two convertible notes that
were  originated  during 2002.  There was $5,332 accrued unpaid interest at June
30, 2004.

A Schedule of the maturity dates of the convertible debentures with their
attached warrants are as follows:

                                       9
<PAGE>

ACCOUNTS AND NOTES PAYABLE - continued


                    Original        Extended
    Amount       Maturity Date   Maturity Date      Warrants Outstanding
-------------  ----------------  -------------  -------------------------------
    $ 16,000      10/11/03         10/11/04     40,000 shares at $.40 per share
    $ 10,000      11/16/03         11/16/04     25,000 shares at $.40 per share
    $ 10,000       7/23/04          7/23/05     25,000 shares at $.40 per share

All  debentures can be converted into common stock for the same amount of shares
as their right to purchase the same number of shares through their warrants.

Assuming the Company has the ability to make all note payments under their terms
commencing October 1, 2004 and does not convert or extend the convertible notes
payable, the minimum annual payments are as follows:

                               Year           Amount
                          ------------   --------------
                              2004            $ 211,096
                              2005               89,904
                                         --------------
                                              $ 311,000
                                         ==============

Note 5 - STOCKHOLDERS' EQUITY


On January 13, 2004 the Company also issued 55,866 unrestricted shares under its
registered   2004  Officers,   Directors,   Employees  and   Consultants   Stock
Compensation  Plan at a fair  value of  $10,000  to a  consultant  for  services
performed  during the previous quarter for assistance with the rescission of San
Francisco Funding, Inc.

On January 13, 2004 the Company also issued 88,281 unrestricted shares under its
registered   2004  Officers,   Directors,   Employees  and   Consultants   Stock
Compensation  Plan to two  individuals at a fair value of $14,505 for consulting
services in  connection  with work on the Company's  web site,  assistance  with
acquisitions  and consulting  services  related to planning for  advertising our
mortgage business.

On February 27, 2004 the Company  issued  360,000  restricted  common shares for
fair value to the  officers of the Company for accrued  compensation  of $83,937
and 235,500  restricted  common shares for $45,036 for services through February
2004. The shares were issued under Section 4(2) of the 1933 Securities Act.

On  March  11,  2004  the  Company  issued  20,000  unrestricted  shares  to one
consultant  under  its  registered  2004  Officers,  Directors,   Employees  and
Consultants Stock Compensation Plan for legal services at a fair value of $3,400
for legal work.

During the quarter ended March 31, 2004 the Company  amortized a total of $6,970
of legal services which had been  previously paid for in advance with restricted
common shares and recorded as deferred compensation.

Also  during  the  quarter  ended  March 31,  2004 the  Company  issued  615,000
restricted common shares to accredited investors for $61,500 of cash. A total of
$6,150 was paid in finders fees resulting in the Company receiving $55,350.  The
shares were issued under Section 4(2) of the 1933 Securities Act.

                                       10
<PAGE>

STOCKHOLDERS' EQUITY - continued

On April 21, 2004 the Company issued 26,471 restricted common shares at a deemed
value of $4,500 to a public relations company for services rendered during 2003.
The shares were issued under Section 4(2) of the 1933 Securities Act.

On April 23, 2004 the  Company  issued  55,556  restricted  common  shares to an
accredited  investor in a private  placement  for $5,000  cash.  The shares were
issued under Section 4(2) of the 1933 Securities Act.

On May 4, 2004 the Company issued 266,667 restricted common shares as a retainer
to its legal  counsel.  The shares were issued  under  Section  4(2) of the 1933
Securities Act.

On June 10, 2004 the Company issued 434,386 unrestricted common shares under its
registered   2004  Officers,   Directors,   Employees  and   Consultants   Stock
Compensation  Plan to an  individual  at a fair value of $85,000 for  consulting
services in connection with work on the Company's web site,  computer system set
up and  maintenance in the two offices and assistance in the  preparation of the
Company's last annual audit and quarterly financial statement.  Also on June 10,
2004 the  Company  issued  150,000  restricted  common  shares to an  accredited
investor in a private  placement for $12,000 and 35,000 restricted common shares
at a deemed value of $1,700 to a licensed broker as a finders fee.

On June 17, 2004 the Company issued  1,800,000  shares under an escrow agreement
to Michael  Petrullo and 200,000  restricted  common shares to Michael  Berstein
pending the closing of the acquisition of  Lendingtech.com,  Inc. The shares are
not earned and may be returned to the Company in the event that Lendingtech.com,
Inc. is unable to fulfill its contractual obligations to close. The shares would
be incrementally issued in the event that the Lendingtech.com acquisition closed
and the Company was unable to meet its loan obligation with a cash payment for a
given  month.  The shares  issued under the escrow  agreement  were issued under
Section 4(2) of the 1933 Securities Act.

On June 24, 2004 the Company  issued  145,051  shares to two  directors  for the
settlement  of cash  advances  of $17,406.  On the same date the Company  issued
49,500  shares to two  employees  at a deemed  value of $5,940.  The shares were
issued under Section 4(2) of the 1933 Securities Act.


Note 6 - SUBSEQUENT EVENTS:

On July 1, 2004, we received $12,000 from two accredited  investors in a private
placement for 240,000 restricted common shares.


On July 27, 2004 the Company became licensed under the California  Department of
Corporations  as a Consumer  Finance  Lender  through its  subsidiary  Silverado
Financial Mortgage, formerly Realty Capital Corporation. The license enables the
Company to contract with loan  originators as independent  contractors who would
serve under the California Department of Real Estate license.

On August 11, 2004 our wholly owned subsidiary,  Silverado Mortgage  Corporation
(formerly  Realty  Capital  Corporation)  received  approval  for  a  $2,000,000
Mortgage Warehouse and Security Facility.

                                       11
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THIS REPORT CONTAINS  FORWARD-LOOKING  STATEMENTS  WITHIN THE MEANING OF SECTION
21E OF THE  SECURITIES  EXCHANGE  ACT OF 1934,  INCLUDING,  WITHOUT  LIMITATION,
STATEMENTS REGARDING OUR EXPECTATIONS,  BELIEFS, INTENTIONS OR FUTURE STRATEGIES
THAT ARE SIGNIFIED BY THE WORDS "EXPECTS", "ANTICIPATES", "INTENDS", "BELIEVES",
OR  SIMILAR  LANGUAGE.  SUCH  FORWARD-LOOKING  STATEMENTS  INCLUDE,  BUT ARE NOT
LIMITED TO, THE SEEKING OF REVENUE PRODUCING ACQUISITIONS, THE DEVELOPMENT PLANS
FOR THE  TECHNOLOGIES OF THE COMPANY,  TRENDS IN THE RESULTS OF OUR DEVELOPMENT,
ANTICIPATED  DEVELOPMENT PLANS,  OPERATING EXPENSES AND OUR ANTICIPATED  CAPITAL
REQUIREMENTS AND CAPITAL  RESOURCES.  THESE  FORWARD-LOOKING  STATEMENTS INVOLVE
RISKS,  UNCERTAINTIES AND OTHER FACTORS. ALL FORWARD-LOOKING STATEMENTS INCLUDED
IN THIS DOCUMENT ARE BASED ON  INFORMATION  AVAILABLE TO THE COMPANY ON THE DATE
HEREOF AND SPEAK ONLY AS OF THE DATE HEREOF.  THE FACTORS  DISCUSSED BELOW UNDER
"FORWARD-LOOKING  STATEMENTS"  AND  ELSEWHERE IN THIS  QUARTERLY  REPORT ON FORM
10-QSB ARE AMONG THOSE  FACTORS THAT IN SOME CASES HAVE AFFECTED OUR RESULTS AND
COULD CAUSE THE ACTUAL RESULTS TO DIFFER  MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. IN ADDITION, THE FOLLOWING DISCUSSION IS INTENDED TO
PROVIDE AN ANALYSIS OF OUR FINANCIAL  CONDITION AND PLAN OF OPERATION AND SHOULD
BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO.

MANAGEMENT'S PLAN OF OPERATION

During the next twelve  months our ability to increase the number of offices and
revenue will depend on the availability of cash.  During the first six months of
2004, we raised $72,350 from accredited investors through the sale of restricted
common stock at 50% discount to market on the day preceding investment. In order
to continue to expand operations,  we intend to raise additional  capital, up to
$121,500,  through the continued sale of restricted common stock on these terms.
We believe  that  continued  increases  in revenue will enable us to pay for our
current operating expenses and preclude the need to raise any additional amounts
in the short term.


We plan to improve our FinanCenter software during the fourth quarter of 2004 as
part of our plan to increase  the number of sales  offices  over the next twelve
months.  On July 27, 2004 we became licensed under the California  Department of
Corporations  as a Consumer  Finance  Lender  through our  subsidiary  Silverado
Financial  Mortgage,  formerly  Realty  Capital  Corporation.  This license will
enable us to add significant  numbers of W-2 employees and to expand  throughout
California in contrast to the current  independent  contractors  who serve under
our current California Department of Real Estate license.

Our intention is to become a  multifaceted  real estate  services  company which
leverages  advances  in  technology  to  increase  our  competitive  advantages.
Silverado is currently  considering  the  acquisition of firms and attempting to
establish business lines in the mortgage  brokerage,  mortgage banking and other
real estate related business sectors.

From  inception in 1994 until the fourth quarter of 2002,  Silverado  Financial,
Inc. (formerly, "Rhombic Corporation"), was primarily focused on the acquisition
of the rights to innovative  scientific  technologies  that could  ultimately be
developed  into numerous  applications.  During the years of 1999 through 2001we
began to focus on the  research  and  development  of its  portfolio of acquired
technologies  and to  develop  specific  applications  in  order  to  make  them
commercially  marketable.  Our  business  strategy  was to  develop  a  specific
application from a technology,  then commence or contract for a marketing effort
for the developed application that would generate sales.

                                       12
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

In 2002 we  concluded  that we could not raise  capital  to pursue  the  planned
efforts for the scientific  technology and began seeking  potential  acquisition
candidates. During the fourth quarter of 2002 we appointed John Hartman as Chief
Executive Officer and director and Sean Radetich as a director.

On November 11, 2002,  the board of  directors  of the  Registrant  approved the
issuance of 22,000,000 restricted shares of its common stock for the acquisition
of all of the issued and outstanding shares of Financial Software, Inc. ("FSI").
The transaction was closed on November 19, 2002. The value of the  consideration
in the exchange was determined at arms length by FSI and the registrant. FSI was
in the financial services technology and publishing  industry. A majority of the
shareholders  of record on  February  10,  2003 voted to amend the  Articles  of
Incorporation  of the  Registrant to change the name of the Company to Silverado
Financial,  Inc. and to change the authorized  common shares to 100,000,000  and
the  authorized  preferred  shares to 5,000,000  as described in an  information
statement  filed on Form 14C with the  Securities  and  Exchange  Commission  on
February 11, 2003. The Registrant  filed with the Secretary of State of Nevada a
Certificate of Amended Articles of Incorporation on March 21, 2003.

On May 9, 2003 we  acquired  Silverado  Mortgage  Corporation,  formerly  Realty
Capital  Corporation,  from our president,  John Hartman,  in a non-arms  length
transaction which offices in Campbell, California.

The majority of our sales and  telemarketing  staff are independent  contractors
although we do have four  statutory  employees  and we utilize  consultants  for
matters pertaining to coordinating technology development and administration.

When current  management became responsible for the operations of the company in
2002, among our primary concerns were proposed changes to RESPA  regulations and
other regulatory  changes such as those concerning  predatory  lending,  and the
desire to better  control the lending  process and to earn more  revenue than we
could as a mortgage broker. To that end, On August 11, 2004,  Silverado Mortgage
Corporation  (Formerly Realty Capital  Corporation)  received its first Mortgage
Banking Warehouse Line of Credit in the amount of $2,000,000. We anticipate that
through the use of this credit facility and any others we may be approved for in
future, we will be able to obtain

     i.)  Better  Pricing - Investors  should pay more for closed  loans  versus
          loans that are brokered or table-funded;
     ii.) More Pricing  Options - We may be able to take  advantage of mandatory
          and small bulk sale pricing further  increasing the premiums  received
          from investors on the sale of loans;
     iii.)No Disclosure of SRP - Loans warehoused by may be treated  differently
          under RESPA as to  disclosure  of premiums  received  from  investors.
          Bankers do not disclose the SRP (Servicing  Released  Premium) paid to
          them by  investors.  Bankers  no longer  receive a YSP  (Yield  Spread
          Premium), a disclosable item on borrower closing statements;
     iv.) More Control - We may be able to originate  and close loans in our own
          name.  Under certain  circumstances we will no longer have to wait for
          lenders to underwrite and document loans or to schedule  closings.  In
          certain  circumstances  we may be able to  control  that  process  and
          should be able to provide customers with more timely service;
     v.)  Function as  Principal - We may  function as a principal in the market
          and may own  loans  until  those  loans  are sold  into the  secondary
          market,  we may be able to earn  interest  on the loans  until it they
          sold to an investor;


                                       13
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

     vi.) New  Origination  Channels  - As a  correspondent  lender or  mortgage
          banker, we may be able to originate loans through retail and wholesale
          origination channels;
     vii.)Ability  to  Compete  -  Functioning  as a banker  may help us  appear
          larger in size, making it easier to compete against traditional retail
          banking institutions.

As a Banker,  Silverado  will have more control over its product line and may be
able to generate  additional fees and income associated with a banking platform.
Management  believes our transition to a mortgage banking platform will increase
margins  and as a  banker,  management  believes  we will be more  appealing  to
acquisition targets.


Results of Operations

Comparison of Quarter Ended June 30, 2004 and 2003

During the second  quarter of 2004 our mortgage  brokerage  operation  generated
$204,098.  Revenues  during the second  quarter of 2003 began on May 9, 2003 and
amounted to $17,825. The significant increase in revenues was due to increase in
loan  origination  officers and the  establishment of a second office during the
second quarter of 2004.

Direct  selling of  expenses of $155,238  during the second  quarter  were sales
commissions  and referral fees.  There were no direct expenses during the second
quarter of 2003.

Consulting and general and administrative  expenses during the second quarter of
2004 were  211,041  compared to  $229,286.  The  expenses  incurred  during both
comparative  quarters were for officer salaries,  office expenses and consulting
fees pertaining to computer systems and administrative work.

Comparison of six months ended June 30, 2004 and 2003

We did not have a  mortgage  brokerage  operation  until May 9,  2003.  Revenues
during  the first  six  months of 2004 were  $312,783  compared  to the  $17,825
generated  during the last two months of the period during 2003. The significant
increase in revenues  was due to increase in loan  origination  officers and the
establishment of a second office during the second quarter of 2004

Direct selling of expenses of $235,458 during the six months ended June 30, 2004
were sales  commissions and referral fees.  There were no direct expenses during
the second quarter of 2003.

Consulting and general and  administrative  expenses during the six months ended
June 30, 2004 were $457,767  compared to $417,247.  The expenses incurred during
both  comparative  quarters  were for  officer  salaries,  office  expenses  and
consulting fees pertaining to computer systems and administrative work.

Management's objective during the first quarter of 2004 was to increase revenues
over the last  quarter of 2003 and to find  potential  acquisitions  candidates.
Management's  objective  during the first  quarter  of 2003 was to  restate  its
capital structure to attract  investment capital and to register an employee and
consultants stock  compensation plan in a registration  statement on Form S-8 in
order to attract  competent  consultants to assist in structuring the Company to
attract potential acquisitions.

                                       14
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

On April  15,  2004 we  signed a lease for our  second  office on 2,512 sq.  ft.
located at 5976 W. Las Positas,  Suite 112,  Pleasanton,  CA 94588.  The monthly
lease rate is $4,396.  The lease has a term of 36 months.  Lease payments do not
commence until June 15, 2004.

On April 20,  2004 and in  connection  with the lease,  we  acquired  furniture,
fixtures and equipment in exchange for $12,000. The acquired furniture, fixtures
and equipment consist primarily of a digital telephone system,  office cubicles,
file cabinets, a copier, lamps, chairs and office kitchen appliances.

Liquidity and Capital Resources

At June 30, 2004 we had $42,446 in cash and $45,449 in current  assets.  We also
had $400,324 in current  liabilities.  Although we could probably settle debt to
affiliates of $949 and accrued officer salaries of $84,980 for restricted common
stock, we would still have approximately $268,956 as a working capital deficit.

On February 1, 2004, we began a private  placement to  accredited  investors for
$200,000.  Subscribers  receive shares at a 50% discount to the closing price of
SLVO common stock on the day preceding receipt of their  subscription  agreement
and investment.  This offering is open only to accredited investors.  As of June
30, 2004, we had received $72,350 under this private placement.  However,  there
is no  assurance  that  we will be able to  fully  subscribe  this  offering  or
generate  capital  sufficient  to meet our long-term  needs.  If we can not meet
these requirements, we may not be able to continue as a going concern.

We believe that we have sufficient  capital and resources to support  operations
through the remainder of 2004.  However,  we do not believe that we will be able
to  successfully  implement  our long  term  plans  without  raising  additional
capital.  We  anticipate  that the capital  requirements  for the balance of the
period ending December 31, 2004 will require that additional cash be raised from
external  sources.  We believe that this  requirement will be met by cash equity
investments.

SUBSEQUENT EVENTS

On July 1, 2004, we received $12,000 from two accredited  investors in a private
placement for 240,000 restricted common shares.


On July 27, 2004 the Company became licensed under the California  Department of
Corporations  as a Consumer  Finance  Lender  through its  subsidiary  Silverado
Financial Mortgage, formerly Realty Capital Corporation. The license enables the
Company to contract with loan  originators as independent  contractors who would
serve under the California Department of Real Estate license.

On August 11, 2004 our wholly owned subsidiary,  Silverado Mortgage  Corporation
(formerly  Realty  Capital  Corporation)  received  approval  for  a  $2,000,000
Mortgage Warehouse and Security Facility.

FORWARD LOOKING STATEMENTS

Certain  statements  made in this  report on Form  10-QSB is  "forward  looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements  involve known and unknown risks,  uncertainties and other
factors that may cause our actual  results,  performance or  achievements  to be
materially  different  from any future results  implied by such forward  looking


                                       15
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

statements. Although we believes that the expectations reflected in such forward
looking  statements are based upon  reasonable  assumptions,  our actual results
could differ materially from those set forth in the forward looking  statements.
Certain factors that might cause such a difference might include: the failure of
the registrants  efforts to secure additional  equity capital,  the inability to
successfully  execute  the  revised  business  plan,  the  success or failure to
implement the management to operate possible  acquisitions  profitably,  and the
registrant's planned marketing, public relations and promotional campaigns.

RISK FACTORS

Stockholders  and  prospective  purchasers of our common stock should  carefully
consider the risks  described  below before  making a decision to buy our common
stock.  If any of the following  risks  actually  occurs,  our business could be
harmed.  In that case, the trading price of our common stock could decline,  and
you may lose all or part of your investment. When determining whether to buy our
common stock,  stockholders and prospective  purchasers should also refer to the
other information in this Form 10-K,  including our financial statements and the
related notes.

A prolonged  economic  slowdown or a lengthy or severe  recession could hurt our
operations, particularly if it results in a decline in the real estate market.

The risks associated with our business are more acute during periods of economic
slowdown or recession  because  these  periods may be  accompanied  by decreased
demand for consumer  credit and declining  real estate  values.  Declining  real
estate  values  reduce the  ability of  borrowers  to use home equity to support
borrowings  because  they  negatively  affect  loan-to-value  ratios of the home
equity collateral. In addition, because we make a substantial number of loans to
credit-impaired  borrowers, the actual rates of delinquencies,  foreclosures and
losses on these loans could be higher during economic  slowdowns.  Any sustained
period of increased delinquencies, foreclosures or losses could adversely affect
our ability to sell loans, the prices we receive for our loans, the value of our
mortgage loans held for investment or our residual interests in securitizations,
which  could  have a  material  adverse  effect on our  results  of  operations,
financial condition and business prospects.

Our earnings may decrease  because of increases or decreases in interest  rates.
Our  profitability  may be directly  affected by changes in interest rates.  The
following  are some of the risks we face  related  to an  increase  in  interest
rates:

          o    An interest rate increase may affect our earnings by reducing the
               spread  between  the  interest  we  receive  on our loans and our
               funding costs.

          o    A  substantial  and  sustained  increase in interest  rates could
               adversely affect our loan origination volume because  refinancing
               an existing loan would be less  attractive  and  qualifying for a
               purchase loan may be more difficult.

          o    During  periods  of  rising   interest   rates,   the  value  and
               profitability of our loans may be negatively affected between the
               date  of  origination  or  purchase  and  the  date  we  sell  or
               securitize the loan.

                                       16
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

          o    When and if we securitize loans, the value of residual  interests
               we retain  and the  income we  receive  from the  securitizations
               structured  as  financings  are  based  primarily  on the  London
               Inter-Bank  Offered Rate ("LIBOR").  This is because the interest
               on the underlying  mortgage loans is based on fixed rates payable
               on  the  loans  for  the  first  two or  three  years  while  the
               bondholders are generally paid based on an adjustable LIBOR-based
               yield.  An  increase  in LIBOR  reduces  the net  income we would
               receive from, and the value of, these mortgage loans and residual
               interests.

          o    Our  adjustable-rate  mortgage  loans have  periodic and lifetime
               interest rate caps above which the interest rate on the loans may
               not rise. In the event of general  interest rate  increases,  the
               rate of interest on these mortgage loans could be limited,  while
               the  rate  payable  on  the  senior   certificates   representing
               interests  in a  securitization  trust into which these loans are
               sold may be  uncapped.  This  would  reduce the amount of cash we
               receive over the life of the loans in securitizations  structured
               as financings and our residual interests, and could require us to
               reduce the carrying value of our residual interests.

We are also subject to risks from  decreasing  interest  rates.  For example,  a
significant  decrease in interest  rates could  increase the rate at which loans
are prepaid,  which also could  require us to reduce the  carrying  value of any
residual interests.  If prepayments are greater than expected, the cash we would
receive   over  the  life  of  our   residual   interests   would  be   reduced.
Higher-than-expected  prepayments could also have a negative effect on the value
of any servicing portfolio.

Any such changes in interest  rates could have a material  adverse effect on our
results of operations, financial condition and business prospects.

An interruption or reduction in the  securitization and whole loan markets could
hurt our financial position.

As we implement our plan to become a full service mortgage  banking company,  we
will become increasingly  dependent on the securitization market for the sale of
our loans because we intend to securitize  loans directly in the future and many
of the  whole  loan  buyers  who  purchase  loans  do so with the  intention  to
securitize  them.  The  securitization  market  is  dependent  upon a number  of
factors,  including  general economic  conditions,  conditions in the securities
market   generally  and  conditions  in  the  asset-backed   securities   market
specifically.  In addition,  poor  performance of previously  securitized  loans
could harm our access to the securitization  market.  Accordingly,  a decline in
the  securitization  market or a change in the  market's  demand for loans could
have a material adverse effect on our results of operations, financial condition
and business prospects.

If we are unable to maintain adequate  financing  sources,  our earnings and our
financial   position  will  suffer  and   jeopardize  our  ability  to  continue
operations.

We require  substantial  cash to support  our  operating  activities  and growth
plans.  Our primary  sources of cash are profits  generated by sales of mortgage
products  and the sale of our  capital  stock;  however,  we intend to  generate
income from warehouse and aggregation credit facilities, asset-backed commercial


                                       17
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

paper and the  proceeds  from the sales and  securitizations  of loans.  We also
intend to finance residual  interests in securitization  transactions  using Net
Interest  Margin,  or  NIM,  structures.  As of  December  31,  2003,  we had no
short-term   warehouse  and  aggregation   credit   facilities  or  asset-backed
commercial  paper  providing  us with any  committed  or  uncommitted  borrowing
capacity to fund loan originations and purchases pending the pooling and sale of
such loans. As of March 27, 2004, we are in negotiations to acquire a short term
warehouse  facility.  If we cannot  maintain  or  replace  these  facilities  on
comparable  terms and  conditions,  we may incur  substantially  higher interest
expense that would reduce our profitability.

During volatile times in the capital and secondary markets, access to warehouse,
aggregation and residual  financing as well as access to the  securitization and
secondary markets for the sale of loans has been severely constricted. If we are
unable to  maintain  adequate  financing  or other  sources of  capital  are not
available, we would be forced to suspend or curtail our operations,  which could
have a material adverse effect on our results of operations, financial condition
and business prospects.

New legislation  could restrict our ability to make mortgage loans,  which could
adversely impact our earnings.

Several states and cities are  considering  or have passed laws,  regulations or
ordinances aimed at curbing predatory lending practices.  The federal government
is also  considering  legislative  and regulatory  proposals in this regard.  In
general, these proposals involve lowering the existing federal Homeownership and
Equity   Protection  Act  thresholds  for  defining  a  "high-cost"   loan,  and
establishing  enhanced  protections  and remedies for borrowers who receive such
loans.  However,  many of these laws and rules extend beyond  curbing  predatory
lending practices to restrict commonly  accepted lending  activities,  including
some of our  planned  activities.  For  example,  some of these  laws and  rules
prohibit any form of prepayment charge or severely restrict a borrower's ability
to finance the points and fees charged in  connection  with his or her loan.  In
addition,  some of these laws and  regulations  provide for  extensive  assignee
liability for warehouse lenders,  whole loan buyers and  securitization  trusts.
Because of enhanced risk and for  reputational  reasons,  many whole loan buyers
elect not to  purchase  any loan  labeled as a "high cost" loan under any local,
state or federal  law or  regulation.  Accordingly,  these laws and rules  could
severely  constrict the secondary  market for a significant  portion of our loan
production.  This would  effectively  preclude us from  continuing  to originate
loans that fit within  the newly  defined  thresholds.  For  example,  after the
October 1, 2002 effective date of the Georgia Fair Lending Act, many lenders and
secondary  market  buyers  refused to finance or purchase  Georgia  loans.  As a
result, many companies were forced to cease providing mortgages in Georgia until
the law's  amendment a few months  later.  Similar laws have gone into effect in
New Jersey,  as of November 27, 2003 ("New Jersey Home  Ownership Act of 2002"),
and in New  Mexico,  as of  January 1, 2004 ("New  Mexico  Home Loan  Protection
Act"),  that have impacted  origination of loans in those states.  The potential
long term  reduction  in loans in New Jersey  and in New  Mexico  could be quite
severe.  Moreover,  some of our  competitors who are national banks or federally
chartered  thrifts may not be subject to these laws and may as a consequence  be
able to capture market share from us and other lenders.  For example, the Office
of the Comptroller of the Currency recently issued regulations effective January
7, 2004 that preempt state and local laws that seek to regulate mortgage lending
practices.  Passage of such laws could  increase  compliance  costs,  reduce fee
income and reduce origination volume, all of which would have a material adverse
effect on our results of operations, financial condition and business prospects.

                                       18
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

We are no longer able to rely on the Alternative  Mortgage  Transactions  Parity
Act to preempt  certain state law  restrictions on prepayment  penalties,  which
could adversely impact our earnings.

The value of a mortgage loan depends,  in part, upon the expected period of time
that the mortgage  loan will be  outstanding.  If a borrower pays off a mortgage
loan in advance of this  expected  period,  the holder of the mortgage loan does
not realize the full value  expected to be received  from the loan. A prepayment
penalty  payable by a borrower  who repays a loan earlier  than  expected  helps
offset the reduction in value resulting from the early payoff. Consequently, the
value  of a  mortgage  loan is  enhanced  to the  extent  the  loan  includes  a
prepayment penalty, and a mortgage lender can offer a lower interest rate and/or
lower loan fees on a loan which has a prepayment penalty.  Prepayment  penalties
are an important feature used to obtain value on loans.

Certain state laws restrict or prohibit prepayment  penalties on mortgage loans,
and until July 2003,  lenders  could rely on the  federal  Alternative  Mortgage
Transactions  Parity Act (the "Parity Act") and related rules issued in the past
by the Office of Thrift  Supervision (the "OTS") to preempt state limitations on
prepayment  penalties.  The  Parity  Act was  enacted  to  extend  to  financial
institutions,  other  than  federally  chartered  depository  institutions,  the
federal  preemption  that federally  chartered  depository  institutions  enjoy.
However,  on September  25,  2002,  the OTS released a new rule that reduced the
scope of the Parity Act preemption and, as a result;  we are not able to rely on
the  Parity Act to preempt  state  restrictions  on  prepayment  penalties.  The
effective date of the new rule,  originally  January 1, 2003,  was  subsequently
extended by the OTS until July 1, 2003 in response to concerns  from  interested
parties about the burdens  associated with  compliance.  The elimination of this
federal  preemption  requires us to comply with state restrictions on prepayment
penalties.  These restrictions  prohibit us from charging any prepayment penalty
in eight  states  and limit  the  amount or other  terms and  conditions  of our
prepayment penalties in several other states. This may place us at a competitive
disadvantage  relative to financial  institutions that continue to enjoy federal
preemption  of such state  restrictions.  Such  institutions  are able to charge
prepayment  penalties without regard to state restrictions and, as a result, may
be able to offer loans with interest rate and loan fee structures  that are more
attractive  than the interest rate and loan fee  structures  that we are able to
offer.

The scope of our lending operations exposes us to risks of noncompliance with an
increasing and inconsistent body of complex laws and regulations at the federal,
state and local levels.

Currently,  we are  licensed to  originate  mortgage  loans only in  California,
however we are in the process of applying for licenses to generate  loans in all
50  states,  and when  licensed  we will be forced  to comply  with the laws and
regulations,  as well as judicial and administrative decisions, for all of these
jurisdictions,  as well as an extensive body of federal law and regulations. The
volume of new or modified  laws and  regulations  has increased in recent years,
and,  individual  cities and  counties  have  begun to enact laws that  restrict
non-prime loan origination activities in those cities and counties. The laws and
regulations of each of these  jurisdictions are different,  complex and, in some
cases, in direct  conflict with each other. As our operations  continue to grow,
it may be more difficult to comprehensively  identify,  to accurately  interpret
and to  properly  program  our  technology  systems  and  effectively  train our
personnel with respect to all of these laws and regulations, thereby potentially


                                       19
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

increasing our exposure to the risks of noncompliance with these laws and
regulations.

Our failure to comply with these laws can lead to:

     o    civil and criminal liability;

     o    loss of approved status;

     o    demands for indemnification or loan repurchases from purchasers of our
          loans;

     o    class action lawsuits; or

     o    administrative enforcement actions.

Any of these  results  could have a material  adverse  effect on our  results of
operations, financial condition and business prospects.

If warehouse lenders and securitization underwriters face exposure stemming from
legal  violations  committed by the companies to whom they provide  financing or
underwriting  services,  this could increase our borrowing  costs and negatively
affect the market for whole loans and mortgage-backed securities.

In June 2003,  a  California  jury found a warehouse  lender and  securitization
underwriter liable in part for fraud on consumers  committed by a lender to whom
it  provided  financing  and  underwriting  services.  The jury  found  that the
investment bank was aware of the fraud and substantially  assisted the lender in
perpetrating  the fraud by providing  financing and  underwriting  services that
allowed the lender to  continue to operate,  and held the bank liable for 10% of
the  plaintiff's  damages.  This  is the  first  case we  know  of in  which  an
investment  bank was held partly  responsible  for  violations  committed by the
bank's  mortgage  lender  customer.  If other  courts or  regulators  adopt this
theory,  investment  banks may face  increased  litigation  as they are named as
defendants in lawsuits and  regulatory  actions  against the mortgage  companies
with which they do business. Some investment banks may exit the business, charge
more for  warehouse  lending or reduce the  prices  they pay for whole  loans in
order to build in the costs of this potential  litigation.  This could, in turn,
have a negative  effect on our results of  operations,  financial  condition and
business prospects.

High delinquencies or losses on mortgage loans in  securitizations  may decrease
cash flows or impair our ability to sell or securitize loans in the future.

Loans made to lower credit grade borrowers, including credit-impaired borrowers,
entail a higher  risk of  delinquency  and  higher  losses  than  loans  made to
borrowers with better credit. We plan to make a substantial portion of our loans
to borrowers who do not qualify for loans from conventional mortgage lenders. No
assurance  can be given that our  underwriting  criteria or methods  will afford
adequate protection against the higher risks associated with loans made to lower
credit grade  borrowers.  We will be subject to risks of default and foreclosure
following  the sale of loans through  securitization.  To the extent such losses
are greater than expected;  the cash flows received through  residual  interests
and from  securitizations  structured as financings would be reduced.  Increased
delinquencies  or losses may also  reduce or  eliminate  our  ability to sell or
securitize  loans in the future and could have a substantial,  material  adverse
effect on our operations, financial condition and business prospects.

                                       20
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

Our inability to realize cash proceeds  from loan sales and  securitizations  in
excess  of the loan  acquisition  cost  could  adversely  affect  our  financial
position.

The net cash proceeds  received from loan sales consist of the premiums received
on sales of loans in excess of the outstanding  principal balance, plus the cash
proceeds  received from  securitizations,  minus the discounts on any loans that
are sold for less than the outstanding  principal  balance.  If we are unable to
originate loans at a cost lower than the cash proceeds realized from loan sales,
our results of operations,  financial  condition and business prospects could be
materially adversely affected.

Warehouse  and  aggregation  financing  is subject to margin  calls based on the
lender's opinion of the value of loan collateral.  An unanticipated large margin
call could adversely affect our liquidity.

The amount of  financing  we may receive  under any  warehouse  and  aggregation
financing  agreements  depends in large part on the  lender's  valuation  of the
mortgage  loans  that  secure  the  financings.  Asset-backed  commercial  paper
facilities have similar  provisions.  Each such facility provides the lender the
right,  under certain  circumstances,  to reevaluate  the loan  collateral  that
secures  outstanding  borrowings at any time. In the event the lender determines
that  the  value of the  loan  collateral  has  decreased,  it has the  right to
initiate a margin  call.  A margin  call would  require us to provide the lender
with additional collateral or to repay a portion of the outstanding  borrowings.
Any such  margin  call could have a material  adverse  effect on our  results of
operations, financial condition and business prospects.

We face intense competition that could adversely affect our market share and our
revenues.

We face intense competition from finance and mortgage banking companies and from
Internet-based  lending  companies.  In addition,  certain  government-sponsored
entities,  such  as  Fannie  Mae and  Freddie  Mac,  are  also  expanding  their
participation in the non-prime  mortgage  industry.  These  government-sponsored
entities have a size and  cost-of-funds  advantage  that allows them to purchase
loans  with  lower  rates  or fees  than we are  willing  to  offer.  While  the
government-sponsored  entities  presently  do not have the  legal  authority  to
originate mortgage loans,  including non-prime loans, they do have the authority
to buy  loans.  A  material  expansion  of their  involvement  in the  market to
purchase  non-prime loans could change the dynamics of the industry by virtue of
their sheer size,  pricing  power and the  inherent  advantages  of a government
charter.  In  addition,  if as a result  of their  purchasing  practices,  these
government-sponsored  entities  experience  significantly   higher-than-expected
losses,  such experience could adversely affect the overall investor  perception
of the non-prime mortgage industry.

Competitors with lower costs of capital have a competitive advantage over us. In
addition,  establishing  a lending  operation such as ours requires a relatively
small  commitment  of capital  and human  resources.  This low  barrier to entry
permits new  competitors to enter our markets  quickly and compete with us. This
could have a material  adverse  effect on our results of  operations,  financial
condition and business prospects.

Some thrifts, national banks and their operating subsidiaries are also expanding
their lending  activities.  By virtue of their charters,  these institutions are
exempt  from  complying  with many of the state and local  laws that  affect our


                                       21
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

operations.  For example,  they can offer loans with prepayment  charges in many
jurisdictions where we cannot. If more of these federally chartered institutions
are able to use their preemptive ability to provide more competitive pricing and
terms than we can offer, it could have a material  adverse effect on our results
of operations, financial condition and business prospects.

The  intense  competition  in the  mortgage  industry  has  also  led  to  rapid
technological developments, evolving industry standards and frequent releases of
new  products  and  enhancements.  As mortgage  products are offered more widely
through  alternative  distribution  channels,  such as the  Internet,  we may be
required  to make  significant  changes  to our  information  systems to compete
effectively. Our inability to continue enhancing our current capabilities, or to
adapt to other  technological  changes  in the  industry,  could have a material
adverse  effect on our results of operations,  financial  condition and business
prospects.

Our hedging  strategies may not be successful in mitigating our risks associated
with changes in interest rates.

We intend to use various derivative financial  instruments to provide a level of
protection  against  changes in  interest  rates,  but no hedging  strategy  can
protect us  completely.  When rates change we expect to record a gain or loss on
derivatives  which would be offset by an inverse change in the value of loans or
residual interests.  We cannot assure you, however,  that our use of derivatives
will offset the risks  related to changes in interest  rates.  It is likely that
there will be periods in the future,  during  which we will incur  losses  after
accounting for our derivative  financial  instruments.  The derivative financial
instruments  we select may not have the effect of  reducing  our  interest  rate
risk. In addition,  the nature and timing of hedging  transactions may influence
the effectiveness of these strategies.  Poorly designed strategies or improperly
executed  transactions could actually increase our risk and losses. In addition,
hedging  strategies  involve  transaction  and other costs. We cannot assure you
that our hedging strategy and the derivatives that we use will adequately offset
the risk of interest rate volatility or that our hedging  transactions  will not
result in losses.

The  complex  federal,   state  and  municipal  laws  governing  loan  servicing
activities could increase our exposure to the risk of noncompliance.

We intend to service the loan we originate on a nationwide basis.  Therefore, we
must  comply  with  the  laws  and   regulations,   as  well  as  judicial   and
administrative  decisions,  of all  relevant  jurisdictions  pertaining  to loan
servicing,  as well as an extensive  body of federal laws and  regulations.  The
volume of new or modified  laws and  regulations  has increased in recent years,
and, in addition,  some individual  municipalities have begun to enact laws that
restrict loan servicing  activities.  The laws and  regulations of each of these
jurisdictions are different, complex and, in some cases, in direct conflict with
each  other.  As our  servicing  operations  continue  to  grow,  it may be more
difficult to comprehensively  identify,  to accurately interpret and to properly
program our technology  systems and effectively train our personnel with respect
to all of  these  laws  and  regulations,  thereby  potentially  increasing  our
exposure to the risks of noncompliance with the laws and regulations  pertaining
to loan  servicing.  Our failure to comply with these laws could lead to,  among
other things:  (i) civil and criminal  liability,  including  potential monetary
penalties; (ii) legal defenses causing delaying or otherwise adversely affecting
the  servicer's  ability to enforce  loans,  or giving the borrower the right to
rescind or cancel the loan  transaction;  (iii) class action lawsuits;  and (iv)


                                       22
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

administrative  enforcement  actions.  This could  result in a material  adverse
effect on our results of operations, financial condition and business prospects.

Any non-prime  loans we originate  will generally  have higher  delinquency  and
default  rates,  which could  result in losses on loans that we are  required to
repurchase.

Non-prime  mortgage loans  generally have higher  delinquency  and default rates
than prime mortgage loans. Delinquency interrupts the flow of projected interest
income from a mortgage loan,  and default can  ultimately  lead to a loss if the
net  realizable  value  of the  real  property  securing  the  mortgage  loan is
insufficient to cover the principal and interest due on the loan. Also, our cost
of financing and servicing a delinquent  or defaulted  loan is generally  higher
than for a performing loan. We bear the risk of delinquency and default on loans
beginning  when we originate  them. In whole loan sales our risk of  delinquency
typically only extends to the first payment,  but when we securitize we continue
to bear some exposure to delinquencies and losses through our residual interests
and the loans underlying our on-balance sheet  securitization  transactions.  We
are required to establish  reserves based on our anticipated  delinquencies  and
losses.  We also  re-acquire the risks of delinquency and default for loans that
we are obligated to repurchase. We attempt to manage these risks with risk-based
loan pricing and appropriate  underwriting policies and loan collection methods.
However,   if  such  policies  and  methods  are  insufficient  to  control  our
delinquency and default risks and do not result in appropriate  loan pricing and
appropriate  loss reserves,  our business,  financial  condition,  liquidity and
results of operations could be harmed.

We are subject to losses due to  fraudulent  and  negligent  acts on the part of
loan applicants, mortgage brokers, other vendors and our employees.

When we originate  mortgage loans, we rely heavily upon information  supplied by
third  parties  including  the  information  contained in the loan  application,
property appraisal,  title information and employment and income  documentation.
If any of this information is intentionally  or negligently  misrepresented  and
such  misrepresentation  is not detected prior to loan funding, the value of the
loan may be significantly lower than expected.  Whether a  misrepresentation  is
made by the loan applicant,  the mortgage broker,  another third party or one of
our  employees,  we  generally  bear  the  risk  of  loss  associated  with  the
misrepresentation.  A loan subject to a material  misrepresentation is typically
unsaleable  or subject to  repurchase  if it is sold prior to  detection  of the
misrepresentation,  and the persons and entities involved are often difficult to
locate and it is often  difficult  to collect any  monetary  losses that we have
suffered from them.

There are controls  and  processes  designed to help us identify  misrepresented
information in our loan origination  operations.  We cannot assure you, however,
that we have detected or will detect all misrepresented  information in our loan
originations.

We may be subject  to fines or other  penalties  based  upon the  conduct of our
independent brokers.

The mortgage brokers from which we obtain loans have parallel and separate legal
obligations to which they are subject.  While these laws may not explicitly hold
the  originating  lenders  responsible  for the  legal  violations  of  mortgage
brokers,  increasingly  federal  and state  agencies  have sought to impose such
assignee  liability.  Recently,  for example,  the United  States  Federal Trade


                                       23
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

Commission  ("FTC")  entered into a settlement  agreement with a mortgage lender
where the FTC  characterized a broker that had placed all of its loan production
with a single lender as the "agent" of the lender. The FTC imposed a fine on the
lender in part because,  as "principal," the lender was legally  responsible for
the mortgage broker's unfair and deceptive acts and practices. The United States
Justice  Department in the past has sought to hold a non-prime  mortgage  lender
responsible for the pricing practices of its mortgage brokers, alleging that the
mortgage lender was directly  responsible for the total fees and charges paid by
the borrower under the Fair Housing Act even if the lender neither dictated what
the  mortgage  broker  could  charge  nor kept the  money  for its own  account.
Accordingly,  we may be  subject  to  fines or other  penalties  based  upon the
conduct of our independent mortgage brokers.

Our business is  dependent  upon  conditions  in  California  where we conduct a
significant amount of our business.

In 2003,  100% of the mortgage  loans we originated  were secured by property in
California.  An overall  decline in the economy or the  residential  real estate
market,  or the occurrence of a natural  disaster,  such as an earthquake,  or a
major terrorist  attack in California  could  adversely  affect the value of the
mortgaged  properties  in  California  and  increase  the  risk of  delinquency,
foreclosure,  bankruptcy, or loss on mortgage loans in our portfolio. This would
negatively  affect our ability to purchase,  originate and  securitize  mortgage
loans,  which could have a material  adverse  effect on our business,  financial
condition and results of operations.

If many of our borrowers  become  subject to the  Soldiers'  and Sailors'  Civil
Relief Act of 1940, as amended our cash flows from our residual  securities  and
our securitizations structured as financings may be adversely affected.

Under the Soldiers' and Sailors' Civil Relief Act of 1940, a borrower who enters
military service after the origination of his or her mortgage loan generally may
not be  charged  interest  above an annual  rate of 6% during  the period of the
borrower's  active duty  status.  The Act also  applies to a borrower who was on
reserve  status and is called to active duty after  origination  of the mortgage
loan.  A  prolonged,  significant  military  mobilization  as part of the war on
terrorism or the war in Iraq could  increase the number of the  borrowers in our
securitized  pools who are subject to this Act and thereby  reduce the  interest
payments  collected from those borrowers.  To the extent the number of borrowers
who are subject to this Act is significant, the cash flows we receive from loans
underlying our on-balance sheet  securitizations and from our residual interests
would be  reduced,  which  could  cause us to reduce the  carrying  value of our
residual interests and would decrease our earnings.  In addition,  the Soldiers'
and Sailors' Civil Relief Act of 1940, imposes limitations that would impair the
ability of the  servicer to foreclose  on an affected  mortgage  loan during the
borrower's period of active duty status, and under certain circumstances, during
an  additional  three month period  thereafter.  Any such  reduction in our cash
flows or impairment in our performance  could have a material  adverse effect on
our results of operations, financial condition and business prospects.

The inability to attract and retain qualified employees could significantly harm
our business.

We are dependent on our account  executives  and retail loan officers to attract
borrowers  by,  among other  things,  developing  relationships  with  financial
institutions,   other  mortgage  companies  and  brokers,  real  estate  agents,
borrowers  and others.  We believe that these  relationships  lead to repeat and


                                       24
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

referral  business.  The market for skilled account executives and loan officers
is highly  competitive and historically has experienced a high rate of turnover.
In addition,  if a manager leaves New Century,  there is an increased likelihood
that other  members of his or her team will follow.  Competition  for  qualified
account  executives and loan officers may lead to increased hiring and retention
costs.  If we are  unable to attract  or retain a  sufficient  number of skilled
account  executives  at  manageable  costs,  we will be  unable to  continue  to
originate  quality  mortgage loans that we are able to sell for a profit,  which
would have a material  adverse  effect on our results of  operations,  financial
condition and business prospects.

An  interruption  in or breach of our  information  systems  may  result in lost
business.

We rely  heavily  upon  communications  and  information  systems to conduct our
business.  Any failure or  interruption or breach in security of our information
systems or the  third-party  information  systems  on which we rely could  cause
underwriting or other delays and could result in fewer loan  applications  being
received,  slower  processing  of  applications  and reduced  efficiency in loan
servicing.  We are  required  to  comply  with  significant  federal  and  state
regulations with respect to the handling of customer information, and a failure,
interruption  or breach of our  information  systems  could result in regulatory
action and  litigation  against us. We cannot  assure you that such  failures or
interruptions  will not occur or if they do occur  that they will be  adequately
addressed by us or the third  parties on which we rely.  The  occurrence  of any
failures or interruptions could have a material adverse effect on our results of
operations, financial condition and business prospects.

The success and growth of our business  will depend upon our ability to adapt to
and implement technological changes.

Our mortgage loan origination  business is currently  dependent upon our ability
to effectively interface with our brokers, borrowers and other third parties and
to efficiently  process loan applications and closings.  The origination process
is becoming more dependent upon technological  advancement,  such as the ability
to process applications over the Internet, accept electronic signatures, provide
process status updates instantly and other  customer-expected  conveniences that
are  cost-efficient  to our  process.  In  addition,  we are in the  process  of
implementing a new loan origination system. Implementing and becoming proficient
with the new loan  origination  system  and other new  technology  will  require
significant  financial and personnel  resources.  There is no guarantee that the
implementation  of our new loan origination  system or other new technology will
be successful. To the extent that we become reliant on any particular technology
or technological  solution, we may be adversely affected to the extent that such
technology or  technological  solution (i) becomes  non-compliant  with existing
industry  standards,  (ii)  fails  to meet or  exceed  the  capabilities  of our
competitors'  equivalent  technologies  or  technological  solutions,  or  (iii)
becomes  increasing  expensive  to service,  retain and  update.  Any failure to
acquire  technology  or  technology  solutions  when  necessary  could limit our
ability to remain  competitive  in our industry and could also limit our ability
to increase the  cost-efficiencies  of our operating  model,  which would have a
material  adverse effect on our results of operations,  financial  condition and
business prospects.

We may be required to  repurchase  mortgage  loans or indemnify  investors if we
breach  representations  and  warranties,   which  could  adversely  impact  our
earnings.

                                       25
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

When we sell  loans,  we are  required  to make  customary  representations  and
warranties  about  such  loans  to the  loan  purchaser.  Our  whole  loan  sale
agreements require us to repurchase or substitute loans in the event we breach a
representation   or   warranty   given   to  the  loan   purchaser   or  make  a
misrepresentation  during the mortgage loan origination process. In addition, we
may be required  to  repurchase  loans as a result of  borrower  fraud or in the
event of early payment default on a mortgage loan. Likewise,  we are required to
repurchase  or  substitute  loans if we breach a  representation  or warranty in
connection with our  securitizations.  The remedies  available to a purchaser of
mortgage  loans are  generally  broader  than those  available to us against the
originating  broker or  correspondent.  Further,  if a  purchaser  enforces  its
remedies  against us, we may not be able to enforce the remedies we have against
the sellers.  The  repurchased  loans  typically can only be financed at a steep
discount to their repurchase price, if at all. They are also typically sold at a
significant  discount to the unpaid principal  balance.  Significant  repurchase
activity could negatively affect our cash flow and results of operations.

We are exposed to risk of  environmental  liabilities with respect to properties
to which we take title.

In the course of our business,  we may  foreclose and take title to  residential
properties,  and could be subject to  environmental  liabilities with respect to
these  properties.  We may be held liable to a  governmental  entity or to third
parties for property damage, personal injury, investigation,  and clean-up costs
incurred by these parties in connection with environmental contamination, or may
be  required  to  investigate  or clean up  hazardous  or toxic  substances,  or
chemical  releases at a property.  The costs  associated with  investigation  or
remediation activities could be substantial. In addition, as the owner or former
owner of a  contaminated  site,  we may be subject to common law claims by third
parties based on damages and costs  resulting from  environmental  contamination
emanating  from  the  property.   If  we  ever  become  subject  to  significant
environmental  liabilities,  our  business,  financial  condition and results of
operations could be materially and adversely affected.

Our charter and bylaws and Nevada law contain provisions that could discourage a
takeover.

Our  amended  and  restated  certificate  of  incorporation  and our amended and
restated bylaws include various  provisions that could delay, defer or prevent a
takeover  attempt that may be in the best  interest of our  stockholders.  These
provisions include the existence of a classified board of directors, the ability
of our board of  directors to issue shares of our  preferred  stock  without any
further  stockholder  approval and requirements  that (i) our stockholders  give
advance notice with respect to certain  proposals they may wish to present for a
stockholder  vote, (ii) our  stockholders act only at annual or special meetings
and  (iii)  two-thirds  of all  directors  approve  a change  in the  number  of
directors  on our board of  directors.  Issuance  of our  preferred  stock could
discourage bids for the common stock at a premium as well as create a depressive
effect on the market price of our common stock.

We are also subject to Nevada  General  Corporation  Law which could  discourage
potential  acquisition  proposals,  delay or  prevent  a change of  control  and
prevent changes in our management.

If we do not manage our growth effectively,  our financial  performance could be
harmed.

                                       26
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - continued

Rapid  growth  places,  and will  continue to place,  certain  pressures  on our
management,  administrative,  operational  and financial  infrastructure.  As of
December 31, 2003, we had no employees as all of our personnel were  independent
contractors;   however,  we  have  recently  applied  for  licensure  under  the
California  Department of  Corporations  as a Consumer  Finance  Lender and will
begin  hiring loan  executives  as  employees.  Many of these  employees  have a
limited  understanding of our systems and controls.  The increase in the size of
our  operations  may make it more  difficult  for us to ensure that we originate
quality loans and that we service them effectively.  We will need to attract and
hire  additional  sales and  management  personnel in an  intensely  competitive
hiring  environment  in order to preserve and increase our market share.  At the
same  time,  we will need to  continue  to upgrade  and  expand  our  financial,
operational and managerial systems and controls.

Various  factors  may  cause  the  market  price of our  common  stock to become
volatile, which could adversely affect our ability to access the capital markets
in the future.

The  market  price of our  common  stock may  experience  fluctuations  that are
unrelated to our operating performance.  In particular,  the price of our common
stock may be affected by general market price  movements as well as developments
specifically related to the consumer finance industry and the financial services
sector.  These could  include,  among other  things,  interest  rate  movements,
quarterly  variations or changes in financial estimates by securities  analysts,
or a significant  reduction in the price of the stock of another  participant in
the consumer finance  industry.  This volatility may make it difficult for us to
access the capital markets through additional  secondary offerings of our common
stock, regardless of our financial performance.

ITEM 3: CONTROLS AND PROCEDURES

a) Evaluation of disclosure controls and procedures. Our chief executive officer
and principal  financial officer,  after evaluating the effectiveness of the our
"disclosure  controls and procedures" (as defined in the Securities Exchange Act
of 1934 Rules  13a-15(e) and  15d-15(e)) as of the end of the period  covered by
this  annual  report  (the  "Evaluation  Date"),  has  concluded  that as of the
Evaluation  Date,  our  disclosure  controls and  procedures  were  adequate and
designed to ensure  that  material  information  relating to the Company and our
consolidated  subsidiaries  would be made  known to him by others  within  those
entities.

(b)  Changes  in  internal  control  over  financial  reporting.  There  were no
significant  changes in the our internal control over financial reporting during
the fourth fiscal quarter that materially affected,  or are reasonably likely to
materially affect, the our internal control over financial reporting.

                                       27
<PAGE>


PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On January  27,  2004 DL Pacific  Center LP ("DL  Pacific")  filed a lawsuit for
$40,444 plus costs and attorney's  fees against us in San Diego County  Superior
Court.  The suit alleges that,  after we purchased San Francisco  Funding,  Inc.
("SFF") in November 2003, we assumed SFF's obligations  pursuant to DL Pacific's
lease with SFF by accepting the benefits of such lease and by  negotiating  with
DL Pacific for amendments to the lease. We are vigorously defending the lawsuit.
It is managements  opinion,  that we have  meritorious  defenses based primarily
upon the facts,  among  others,  that (1) we did not accept the  benefits of the
lease and/or (2) the alleged promise(s) made by us is (are)  unenforceable under
the California Statute of Frauds because, among other reasons, the alleged lease
was for more than one year and the alleged  authority  of any agent of Silverado
Financial, Inc. was not in writing, as required under the Statute.

On July 23, 2004 Robert E. Vener  ("Vener")  filed a first amended  complaint to
his lawsuit for late charges of $500 for November, 2003, utility charges of $800
for  November,  2003,  and  $7,500  for rent for  December  2003 plus  costs and
attorney's  fees against us in Marin  County  Superior  Court.  The suit alleges
that, after we purchased San Francisco  Funding,  Inc. ("SFF") in November 2003,
we assumed SFF's  obligations  pursuant to Vener's lease with SFF by stating and
representing  to Vener that we would be responsible for any amounts due from SFF
pursuant to the lease, and that Vener relied on our  representations by allowing
SFF to remain on the premises  following SFF's default in the payment of rent on
the lease. We are vigorously defending the lawsuit. It is management's  opinion,
that we have meritorious  defenses based upon the facts,  among others,  that we
did not state or represent that we would be responsible for any amounts due from
SFF pursuant to the lease.

In regard to the DL Pacific and/or Vener lawsuit(s),  management intends to file
a cross-complaint  against SFF and its major  stockholder(s) Mr. and Mrs. Daniel
Selis,  for  indemnity  for the cost of defending  the actions and for breach of
contract, fraud and/or interference with our advantageous business relationships
because of : (1) their material breaches of the SFF stock purchase agreement and
their material  misrepresentations  to us of their  liabilities and obligations,
(2) SFF's  written false  statements to its creditors  that we had assumed their
debts,  and (3)  their  forwarding  of  SFF's  phone  calls to our  offices  and
directing  their  creditors  to call our  offices  concerning  payment  of their
liabilities and  obligations.  We anticipate that SFF and the Selis' will file a
non-meritorious  cross-complaint  against  us for  breach of the stock  purchase
agreement.

On July 16,  2004,  the  company  was served  with a  complaint  by the State of
California, Department of Industrial Relations on behalf of a former employee of
Silverado  Mortgage  (formerly  Realty  Capital  Corporation)  for back wages of
$10,937.50  and  penalties  of  $288.46  for  an  indeterminate  number.  It  is
management's  opinion,  that we have meritorious  defenses based upon the facts,
among others, that claimant was acting as an independent contractor who was paid
for services performed and her claims are baseless.

On August  16,  2004,  we  received a  complaint  from  Attorney's  representing
Subway.com  alleging  damages in the amount of  $60,000  for breach of  contract
regarding a promotional  campaign.  Management intends to vigorously defend this
lawsuit as it is our opinion that Subway.com breached our contract by failing to
perform  its  duties  there  under.  It is  management's  opinion,  that we have
meritorious  defenses based upon the facts, among others,  that the contract was
never  approved  by  the  compensation  committee  of  the  Silverado  Financial


                                       28
<PAGE>

LEGAL PROCEEDINGS - continued

Mortgage,  no work was ever  performed by Subway.com  and no  consideration  was
given to Subway.com to execute any agreement.

ITEM 2. CHANGES IN SECURITIES

On January 13, 2004 the Company also issued 55,866 unrestricted shares under its
registered   2004  Officers,   Directors,   Employees  and   Consultants   Stock
Compensation  Plan at a fair  value of  $10,000  to a  consultant  for  services
performed  during the previous quarter for assistance with the rescission of San
Francisco Funding, Inc.

On January 13, 2004 the Company also issued 88,281 unrestricted shares under its
registered   2004  Officers,   Directors,   Employees  and   Consultants   Stock
Compensation  Plan to two  individuals at a fair value of $14,505 for consulting
services in  connection  with work on the Company's  web site,  assistance  with
acquisitions  and consulting  services  related to planning for  advertising our
mortgage business.

On February 27, 2004 the Company  issued  360,000  restricted  common shares for
fair value to the  officers of the Company for accrued  compensation  of $83,937
and 235,500  restricted  common shares for $45,036 for services through February
2004. The shares were issued under Section 4(2) of the 1933 Securities Act.

On  March  11,  2004  the  Company  issued  20,000  unrestricted  shares  to one
consultant  under  its  registered  2004  Officers,  Directors,   Employees  and
Consultants Stock Compensation Plan for legal services at a fair value of $3,400
for legal work.

During the quarter ended March 31, 2004 the Company  amortized a total of $6,970
of legal services which had been  previously paid for in advance with restricted
common shares and recorded as deferred compensation.

Also  during  the  quarter  ended  March 31,  2004 the  Company  issued  615,000
restricted common shares to accredited investors for $61,500 of cash. A total of
$6,150 was paid in finders fees resulting in the Company receiving $55,350.  The
shares were issued under Section 4(2) of the 1933 Securities Act.

On April 21, 2004 the Company issued 26,471 restricted common shares at a deemed
value of $4,500 to a public relations company for services rendered during 2003.
The shares were issued under Section 4(2) of the 1933 Securities Act.

On April 23, 2004 the  Company  issued  55,556  restricted  common  shares to an
accredited  investor in a private  placement  for $5,000  cash.  The shares were
issued under Section 4(2) of the 1933 Securities Act.

On May 4, 2004 the Company issued 266,667 restricted common shares as a retainer
to its legal  counsel.  The shares were issued  under  Section  4(2) of the 1933
Securities Act.

On June 10, 2004 the Company issued 434,386 unrestricted common shares under its
registered   2004  Officers,   Directors,   Employees  and   Consultants   Stock
Compensation  Plan to an  individual  at a fair value of $85,000 for  consulting
services in connection with work on the Company's web site,  computer system set
up and  maintenance in the two offices and assistance in the  preparation of the
Company's last annual audit and quarterly financial statement.  Also on June 10,
2004 the  Company  issued  150,000  restricted  common  shares to an  accredited
investor in a private  placement for $12,000 and 35,000 restricted common shares
at a deemed value of $1,700 to a licensed broker as a finders fee.

                                       29
<PAGE>

CHANGES IN SECURITIES - continued

On June 17, 2004 the Company issued  1,800,000  shares under an escrow agreement
to Michael  Petrullo and 200,000  restricted  common shares to Michael  Berstein
pending the closing of the acquisition of Lending Tech.com, Inc. The shares were
issued under Section 4(2) of the 1933 Securities Act.

On June 24, 2004 the Company  issued  145,051  shares to two  directors  for the
settlement  of cash  advances  of $17,406.  On the same date the Company  issued
49,500  shares to two  employees  at a deemed  value of $5,940.  The shares were
issued under Section 4(2) of the 1933 Securities Act.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

     31.1 Certificate  of  Chief  Executive  Officer   quarterly   certification
          pursuant to section 302 of the Sarbanes-Oxley act of 2002

     31.2 Certificate  of  Chief  Financial  Officer   quarterly   certification
          pursuant to section 302 of the Sarbanes-Oxley act of 2002

     32.1 Certification of Chief Executive Officer pursuant to 18 u.s.c. section
          1350, as adopted pursuant to section 906 of the  Sarbanes-Oxley act of
          2002

     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

(b) Reports on Form 8-K

          A Form  8-K/A  was  filed  on  April  7,  2004,  reported  in  Items 4
          pertaining to the Change in the Registrant's Certifying Accountants.

          A Form  8-K was  filed  on May 20,  2004,  reported  in  Items 2 and 7
          pertaining to the acquisition of  Lendingtech.com,  Inc. The agreement
          was amended to extend the closing date until an audit of  Lendingtech,
          com's historical financials were provided.

                                       30
<PAGE>

SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

SILVERADO FINANCIAL, INC.

 /s/ John E. Hartman
 -------------------------------------
Date: August 19, 2004
By: John E. Hartman
President and Chief Executive Officer

 /s/ Albert A. Golusin
 -------------------------------------
Date: August 19, 2004
By: Albert A. Golusin
Chief Financial Officer


                                       31
<PAGE>



Exhibit 31.1

                       QUARTERLY CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John E. Hartman., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Silverado  Financial,
Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a.   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b.   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c.   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,  based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a.   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b.   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6. The  registrant's  other  certifying  officer  and I have  indicated  in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

IN WITNESS  WHEREOF,  the undersigned has executed this  certification as of the
19th day of August 2004.


 /s/ John E. Hartman.
 -----------------------------
     John E. Hartman
     Chief Executive Officer


                                       32
<PAGE>

Exhibit 31.2

                       QUARTERLY CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Albert Golusin, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Silverado  Financial,
Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a.   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b.   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c.   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,  based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a.   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b.   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6. The  registrant's  other  certifying  officer  and I have  indicated  in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

IN WITNESS  WHEREOF,  the undersigned has executed this  certification as of the
19th day of August 2004.

 /s/ Albert Golusin
 -----------------------------
     Albert Golusin
     Chief Financial Officer


                                       33
<PAGE>


Exhibit 32.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                       PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the  Quarterly  Report of Silverado  Financial,  Inc.  (the
"Company")  on Form 10-QSB for the period ending June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, John E.
Hartman., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and result of operations of the Company.

IN WITNESS  WHEREOF,  the undersigned has executed this  certification as of the
19th day of August 2004.


 /s/ John E. Hartman.
 -----------------------------
     John E. Hartman
     Chief Executive Officer


                                       34
<PAGE>



Exhibit 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

In  connection  with the  Quarterly  Report of Silverado  Financial,  Inc.  (the
"Company")  on Form 10-QSB for the period ending June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"),  I, Albert
Golusin, Chief Financial Officer of the Company,  certify, pursuant to 18 U.S.C.
ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and result of operations of the Company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the
19th day of August 2004.

 /s/ Albert Golusin
 -----------------------------
     Albert Golusin
     Chief Financial Officer


                                       35
<PAGE>