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 September 30, 2005

                        Commission File Number 000-29049


                            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 218, 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 September 30, 2005, 20,164,062 of the registrant's common stock, $0.01 par
value  per  share,  were  issued  and  outstanding  and  100,000  shares  of the
registrants preferred were issued and outstanding.












                                       1
<PAGE>

                            Silverado Financial, Inc.

                        Consolidated Financial Statements

              For the Nine Months Ended September 30, 2005 and 2004


                                Table of Contents

                             INDEX TO FORM 10-QSB


PART I. FINANCIAL INFORMATION .............................................. 3

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

        Report of Independent Auditors ....................................  3

        Consolidated Balance Sheet ..................................... 4 - 5

        Consolidated Statements of Income .................................. 6

        Consolidated  Statements  of  Stockholders' Equity  ...............  7

        Consolidated Statements of Cash Flows  ......................... 8 - 9

        Notes to Financial Statements ................................ 10 - 22

Item 2. Management's Discussion and Analysis of Financial
          Condition and Results of Operations.............................. 23

Item 3. Controls and Procedures ........................................... 36

PART II. OTHER INFORMATION ................................................ 38

Item 1. Legal Proceedings ................................................. 38

Item 2. Changes in Securities ............................................. 39

Item 3. Defaults Upon Senior Securities ................................... 39

Item 4. Submissions of Matters to a Vote of Security Holders .............. 39

Item 5. Other Information ................................................. 39

Item 6. Exhibits and Reports on Form 8-K .................................. 39

Signatures ................................................................ 39

                                       2
<PAGE>


PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


Report of Independent Accountants

To the Board of Directors and Stockholders Silverado Financial, Inc.
Pleasanton, California

We have  reviewed  the  accompanying  consolidated  balance  sheets of Silverado
Financial,  Inc. (a Nevada  corporation),  as of June 30, 2005 and 2004, and the
related consolidated  statements of income,  stockholders' equity and cash flows
for the three and six months  then  ended,  in  accordance  with  Statements  on
Standards for Accounting and Review Services issued by the American Institute of
Certified  Public  Accountants.  All  information  included  in these  financial
statements is the representation of the management of Silverado Financial, Inc.

A review consists  principally of inquiries of Company  personnel and analytical
procedures  applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion  regarding the financial  statements taken
as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the  accompanying  financial  statements  in order  for them to be in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a going  concern.  As  discussed  in Note One to the
financial   statements,   the  Company's   significant  operating  losses  raise
substantial  doubt  about  its  ability  to  continue  as a going  concern.  The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

SALLMANN, YANG & ALAMEDA
An Accountancy Corporation
Pleasanton, California


                                       3
<PAGE>


                            Silverado Financial, Inc.

                           Consolidated Balance Sheets


                                                               September 30,
                                                        2005            2004
                                                    -----------     -----------
Assets
Current assets
 Cash                                               $    43,792     $    63,927
 Accounts receivable                                     87,010           3,324
 Mortgage receivable                                    524,300            --
 Investment receivable                                   22,510            --
 Prepaid expenses                                        22,668            --
                                                    -----------     -----------
Total current assets                                    700,280          67,251
Property and equipment
 Furniture and equipment                                406,543         146,271
 Intellectual property                                  699,010            --
 Accumulated depreciation and amortization             (438,778)        (38,843)
                                                    -----------     -----------
Total property and equipment                            666,775         107,428
Other assets
 Deposits                                                58,571          11,547
 Other intangibles                                         --           699,010
 Goodwill                                             2,985,471            --
                                                    -----------     -----------
Total other assets                                    3,044,042         710,557
                                                    -----------     -----------
Total assets                                        $ 4,411,097     $   885,236
                                                    ===========     ===========

See accountants' report and accompanying notes



                                       4
<PAGE>

                            Silverado Financial, Inc.

                           Consolidated Balance Sheets


                                                              September 30,
                                                           2005            2004
                                                   ------------    ------------
Liabilities and stockholders' equity
Current liabilities
 Accounts payable                                  $    289,190    $    293,204
 Warehouse facility payable                             524,300            --
 Notes payable current portion                          531,114            --
 Notes payable - stockholders                            66,384            --
 Due to affiliates                                         --               939
 Equity advances                                        165,500            --
 Convertible notes                                         --            36,000
 Accrued liabilities                                      5,482         185,766
 Accrued wages                                          529,514            --
 Payroll taxes payable                                  287,601            --
 Income taxes payable                                     2,400            --
                                                   ------------    ------------
Total current liabilities                             2,401,485         515,909

Long term debt
 Notes payable - long term portion                    1,297,000         275,000
                                                   ------------    ------------
Total long term debt                                  1,297,000         275,000
                                                   ------------    ------------
Total liabilities                                     3,698,485         790,909

Stockholders' equity
 Preferred stock, $.001 par value,
  1,000,000 shares authorized, 100,000 and 0
  shares issued and oustanding, respectively          1,000,000            --
 Common stock, $.001 par value,
  20,000,000 shares authorized,
  19,635,524 and 20,164,062 shares issued                19,635          18,077
  and oustanding, respectively
 Additional paid in capital                          11,050,161      10,879,985
 Deferred compensation                                     --            (7,030)
 Accumulated deficit                                (11,357,184)    (10,796,705)
                                                   ------------    ------------
Total stockholders' equity                              712,612          94,327
                                                   ------------    ------------
Total liabilities and stockholders' equity         $  4,411,097    $    885,236
                                                   ============    ============


See accountants' report and accompanying notes

                                       5
<PAGE>

                            Silverado Financial, Inc.

                        Consolidated Statements of Income

<TABLE>
<CAPTION>

                                                      For the Three Months          For the Nine Months
                                                       Ended September 30,          Ended September 30,
                                                       2005           2004           2005           2004
                                                -----------    -----------    -----------    -----------
<S>                                                  <C>            <C>           <C>             <C>
Income
 Net sales                                      $ 1,026,469    $   223,908    $ 2,434,091    $   536,691
 Cost of sales                                      136,376           --          437,959           --
                                                -----------    -----------    -----------    -----------
Gross profit                                        890,093        223,908      1,996,132        536,691

Operating expenses
 Selling, general and administrative expenses     1,134,921        350,273      2,550,529      1,043,498
 Depreciation and amortization                       92,511          7,114        231,841         20,942
                                                -----------    -----------    -----------    -----------
Total operating expenses                          1,227,432        357,387      2,782,370      1,064,440
                                                -----------    -----------    -----------    -----------
Operating loss                                     (337,339)      (133,479)      (786,238)      (527,749)
Other income (expense)
 Interest income                                      2,667           --           10,481           --
 Gain on sale of investments                           --             --             --            9,813
 Investment income                                   24,307           --           51,297           --
 Interest expense                                   (52,989)        (6,454)       (76,010)       (19,217)
 Impairment                                            --         (699,010)          --         (699,010)
                                                -----------    -----------    -----------    -----------
Total other income (expense)                        (26,015)      (705,464)       (14,232)      (708,414)
                                                -----------    -----------    -----------    -----------

Loss before income taxes                           (363,354)      (838,943)      (800,470)    (1,236,163)
Provision for income taxes                             --             --            3,200           --
                                                -----------    -----------    -----------    -----------
Net loss                                        $  (363,354)   $  (838,943)   $  (803,670)   $(1,236,163)
                                                ===========    ===========    ===========    ===========

Loss per share (basic)                          $     (0.02)   $     (0.05)   $     (0.04)   $     (0.08)
                                                ===========    ===========    ===========    ===========

Loss per share (dilutive)                       $     (0.02)   $     (0.05)   $     (0.04)   $     (0.08)
                                                ===========    ===========    ===========    ===========
</TABLE>

See accountants' report and accompanying notes

                                       6
<PAGE>

                            Silverado Financial, Inc.

                 Consolidated Statements of Stockholders' Equity
              For the Nine Months Ended September 30, 2005 and 2004

<TABLE>
<CAPTION>

                                                          Additional                                 Total
                                       Common Stock         Paid-in      Deferred     Accumulated Stockholders'
                                 Shares        Amount       Capital    Compensation     Deficit      Equity
                             ------------  ------------  ------------  ------------  ------------ ------------
<S>               <C> <C>      <C>         <C>            <C>          <C>           <C>           <C>              <C>
Balance, December 31, 2003     14,839,492  $     14,839   $ 10,455,513 $    (16,000) $ (9,560,541) $   893,811

Shares issued for payables      2,062,975         1,154       153,051          --            --        154,205
Shares issued for services      2,115,325         1,183       154,921         8,970          --        165,074
Shares issued for cash          1,146,270           901       116,500          --            --        117,401
Net loss                             --            --            --            --      (1,236,164)  (1,236,164)
                             ------------  ------------  ------------  ------------  ------------ ------------

Balance, September 30, 2004    20,164,062  $     18,077  $ 10,879,985  $     (7,030) $(10,796,705)$     94,327
                             ============  ============  ============  ============  ============ ============


                                                                                      Additional                     Total
                                    Preferred Stock             Common Stock            Paid-in    Accumulated  Stockholders'
                                 Shares        Amount        Shares       Amount        Capital      Deficit       Equity
                             ------------  ------------  ------------  ------------  ------------ ------------  ------------

Balance, December 31, 2004           --    $       --      18,216,697  $     18,217  $ 10,889,713 $(10,553,514) $    354,416

Shares issued for payables        100,000     1,000,000       984,691           984        81,722         --       1,082,706
Shares issued for services           --            --         634,136           634        86,383         --          87,017

Shares returned for services                                 (200,000)         (200)       (7,657)                    (7,857)
Net loss                             --            --            --            --            --       (803,670)     (803,670)
                             ------------  ------------  ------------  ------------  ------------ ------------  ------------

Balance, September 30, 2005       100,000  $  1,000,000    19,635,524  $     19,635  $ 11,050,161 $(11,357,184) $    712,612
                             ============  ============  ============  ============  ============ ============  ============
</TABLE>

See accountants' report and accompanying notes

                                       7
<PAGE>

                            Silverado Financial, Inc.

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                            For the Three Months         For the Nine Months
                                                             Ended September 30,          Ended September 30,
                                                           2005           2004           2005           2004
                                                      -----------    -----------    -----------    -----------
<S>                                                         <C>           <C>           <C>             <C>
Operating activities
 Net loss                                             $  (363,354)   $  (838,941)   $  (803,670)   $(1,236,163)
 Adjustments to reconcile net loss to
 cash flows from operating activities:
  Depreciation and amortization                            92,511         18,214        231,841         49,912
  Loss on sale of marketable securities                      --             --             --           (9,813)
  Stock for services and payables                         (59,465)        45,936        110,188        317,360
  Impairment                                                 --          699,010           --          699,010
 (Increase) decrease in:
  Accounts receivable                                     (55,682)          (321)       (70,124)         8,081
  Mortgage receivable                                    (279,300)          --         (524,300)          --
  Investment receivable                                     4,480           --          (22,510)          --
  Prepaid expenses                                          5,018           --          (11,744)          --
  Deposits                                                (13,893)          --          (36,673)        (4,647)
 Increase (decrease) in:
  Accounts payable                                         71,653         19,630        233,320         48,383
  Warehouse facility payable                              279,300           --          524,300           --
  Due to affiliates                                          --           53,500           --           65,419
  Equity advances                                          95,000           --          165,500           --
  Payroll taxes payable                                    40,527           --          201,304           --
  Income taxes payable                                      1,600           --            2,400           --
  Accrued wages                                           135,359           --          323,082           --
  Accrued liabilities                                    (102,198)         5,458         (5,823)        19,217
                                                      -----------    -----------    -----------    -----------
Net cash provided by (used in) operating activities     (148,444)         2,486        317,091        (43,241)


Investing activities
 Proceeds from the sale of investments                       --             --             --           27,588
 Purchases of property and equipment                      (12,479)          --         (158,167)       (12,000)
 Purchase of goodwill                                        --             --       (2,985,471)          --
                                                      -----------    -----------    -----------    -----------
Net cash provided by (used in) investing activities       (12,479)          --       (3,143,638)        15,588
</TABLE>


See accountants' report and accompanying notes

                                       8
<PAGE>

                            Silverado Financial, Inc.

                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>

                                                           For the Three Months           For the Nine Months
                                                            Ended September 30,           Ended September 30,
                                                           2005           2004           2005           2004
                                                      -----------    -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>             <C>
Financing activities
 Proceeds from private placements of stock             $     --      $    62,762      $    --      $    90,350
 Proceeds from issuance of preferred stock                   --             --        1,000,000           --
 Proceeds from issuance of notes payable                     --             --        2,000,000           --
 Proceeds from issuance of shareholder loan                22,617           --           22,617           --
 Repurchase of shareholder stock                             --          (43,767)          --             --
 Payment on notes payable                                 (43,964)          --         (171,886)          --
                                                      -----------    -----------    -----------    -----------
Net cash provided by (used in) financing activities       (21,347)        18,995      2,850,731         90,350

Net increase (decrease) in cash                          (182,270)        21,481         24,184         62,697
Cash at beginning of period                               226,062         42,446         19,608          1,230
                                                      -----------    -----------    -----------    -----------
Cash at end of period                                 $    43,792    $    63,927    $    43,792    $    63,927
                                                      ===========    ===========    ===========    ===========

Supplemental disclosure of cash flow information:

Interest expense                                      $    52,989    $      --      $    76,010    $      --
Income tax expense                                    $      --      $      --      $     1,600    $      --

Supplemental disclosure of non-cash
investing and financing activities:
Receipt of 461,822 common shares for decrease in
 valuation of software purchased with Financial
 Software, Inc.                                       $      --      $   (23,091)   $      --      $   (23,091)

Relinquishment of notes payable for decrease in
 valuation of software purchased with
 Financial Software, Inc.                             $      --      $  (275,000)   $      --      $  (275,000)
Adjustment of Goodwill for vehicle not purchased in
 acquisition of Core One Mortgage                     $     3,945    $      --      $     3,945    $      --
</TABLE>

See accountants' report and accompanying notes

                                       9
<PAGE>

                            Silverado Financial, Inc.
                   Notes to Consolidated Financial Statements
                           September 30, 2005 and 2004

1. Organization and Basis of Presentation

Nature of Operations

Silverado  Financial,  Inc. (the Company) is incorporated  under the laws of the
State of Nevada and based in  Pleasanton,  California  in the San  Francisco Bay
Area. This Company  provides first and second mortgage  products to borrowers in
California through its subsidiary Silverado Mortgage, Corporation.

The  corporation  was  initially  formed on February 26, 1987 as Toledo  Medical
Corporation. The name was changed to Almaz Space Corporation on February 9, 1991
and to Ready When You Are Funwear,  Inc. on April 14, 1992. On February 17, 1995
the name was  changed  to Rhombic  Corporation.  On March 19,  2003 the  company
changed its name to Silverado Financial, Inc.

The Company's efforts,  since inception,  until October 2002, had been primarily
focused on the  acquisition  of the rights to  intellectual  property that could
lead to the development of innovative scientific technologies.  During the years
1999 and 2000 it began to focus on the research and development of its portfolio
of acquired  intellectual  property.  During  2001,  the main  objective  was to
identify and develop specific  applications  from the  intellectual  property in
order to make them  commercially  marketable.  In  November  2002,  the  Company
acquired Financial Software, Inc. as the first part of its strategy to enter the
financial services sector.

As of September  30, 2005,  the Company had three wholly owned  subsidiaries  as
follows:

     o    Financial Software, Inc. (FSI)
     o    Silverado Mortgage Corporation (SMC)
     o    Core One Mortgage, Inc. (Core One)

On November 19,  2002,  the Company  acquired all of the issued and  outstanding
shares of Financial Software, Inc. (FSI) a New Jersey corporation engaged in the
development of Internet and Intranet financial software in addition to operating
several financial industry publishing  websites.  This acquisition was completed
on a share for share exchange basis for 4,400,000 shares of the Company's common
stock. FSI was acquired in order to gain access to certain proprietary  software
products owned by FSI, which the Company  intends to further  develop and extend
into comprehensive mortgage platforms called MortgageCenter and FinanCenter. FSI
transferred its state of incorporation to California in February 2003.

On May 9, 2003,  in a non-arms  length  transaction  with John E.  Hartman,  the
Company's  President,  the Company issued  729,452  shares of restricted  common
stock at a purchase price of $0.175 per share, which was based on the prior five
days average  trading price,  in exchange for all of the  outstanding  shares of
Silverado Mortgage Corporation (SMC). The purchase price of SMC was $127,654 and
was the net asset value of SMC, as  determined  by an  independent,  third party
valuation. The shares were issued under Section 4(2) of the 1933 Securities Act.

On May 5, 2005 the Company acquired all of the issued and outstanding  shares of
Core One Mortgage,  Inc., a Chicago based sub-prime mortgage broker ("Core One")
along  with  entitlement  to fifty  percent  of the future net income of Liberty
Settlement  Services (a Pennsylvania  based title company),  for $3,000,000 in a
combination of preferred stock and structured debt. Core One currently  operates


                                       10
<PAGE>

1. Organization and Basis of Presentation - continued

from three branch office locations: Chicago, Illinois; Pittsburgh, Pennsylvania;
and  Baltimore,  Maryland;  with  licensing  to do business in Florida and South
Carolina.

Additionally Rockford,  Nanophase, ADEPT and RDT were held as subsidiaries until
sold in 2003.  Rockford,  Nanophase,  ADEPT and RDT were never active,  held any
assets or had any liabilities or operations. These subsidiaries were created for
the purpose of developing  specific  applications  from scientific  intellectual
property.  The Company  never  implemented  its plans to develop the  scientific
intellectual property. All of its scientific intellectual  properties,  together
with  certain  marketable  securities  held  for  sale,  were  sold in 2003 to a
director,  in exchange for the return of 62,000 shares of the  Company's  common
stock and the cancellation of $1,100 in debt.

Going Concern and Plan of Operations

The  accompanying  consolidated  financial  statements have been prepared on the
basis of accounting principles applicable to a going concern, which contemplates
the realization of assets and extinguishment of liabilities in the normal course
of business.

As shown in the accompanying financial statements, the Company had a net loss of
$803,670  for the nine months  ended  September  30,  2005.  It has  incurred an
accumulated  deficit of  $11,357,184  and has a deficit  of  working  capital of
$1,701,205 as of September 30, 2005. 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 the Company is unable to continue as a
going concern.

Basis of Presentation

The  Company has  prepared  the  financial  statements  on the accrual  basis of
accounting in accordance with generally  accepted  accounting  principles in the
United  States  of  America.  In the  opinion  of  management,  all  adjustments
considered necessary for a fair presentation have been included.


2. Summary of Significant Accounting Policies

Principles of Consolidation

The  accompanying  consolidated  financial  statements  include the  operations,
account   balances   and  cash  flows  of  the  Company  and  its  wholly  owned
subsidiaries, Financial Services, Inc., Silverado Mortgage Corporation, and Core
One Mortgage,  Inc.  Intercompany  transactions  and account  balances have been
eliminated  in  consolidation.   The  operations  are  consolidated  from  their
respective  acquisition dates of November 19, 2002 (Financial  Services,  Inc.),
May 9, 2003 (Silverado Mortgage Corporation) and May 5, 2005 (Core One Mortgage,
Inc.).

Concentration of Credit Risk

The  Company  maintains  its cash  balances  in several  financial  institutions
located in  California.  The  balances  held are insured by the Federal  Deposit


                                       11
<PAGE>

2. Summary of Significant Accounting Policies - continued

Insurance  Corporation  up to $100,000.  As of September  30, 2005 the Company's
account balances did not exceed these limits.

The Company's revenues are concentrated in the mortgage industry which is highly
competitive  and subject to fluctuations  in economic  condition.  The Company's
results of  operations,  financial  condition  and business  prospects  could be
materially  adversely  affected if  competition  intensifies  or if  competitors
significantly expand their activities in the Company's markets.  Fluctuations in
interest  rates and general  economic  conditions  may also affect the Company's
competitive position.

Cash and Cash Equivalents

For the purpose of the  statements  of cash flows,  the  Company  considers  all
highly  liquid debt  instruments  purchased  with  original  maturities of three
months or less to be cash equivalents.

Financial Instruments

Financial  instruments  consist  primarily of cash,  investments  in  marketable
securities 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.

Investments

Statement of  Financial  Accounting  Standards  (SFAS) No. 115,  Accounting  for
Certain Investments in Debt and Equity Securities,  requires that all applicable
investments be classified as trading  securities,  available for sale securities
or held to  maturity  securities.  The  Company  did not  have  any  investments
classified as trading securities or held-to-maturity  securities.  The statement
further  requires that available for sale  securities be reported at fair value,
with  unrealized  gains and losses  excluded  from  earnings  but  reported in a
separate  component of stockholders'  equity (net of the effect of income taxes)
until they are sold. At the time of sale,  any gains or losses are recognized as
a component of operating results.

At September  30, 2005,  the  Company's  investments  held for sale were $0. The
Company  acquired an investment in Liberty  Settlement  Services,  LLC on May 5,
2005. From that date,  forward,  50% of the income is owned by the Company.  The
Company's  share of income  through  September  30, 2005 is valued at $51,297 of
which $28,787 was distributed during the third quarter of 2005.

Furniture and Equipment

Furniture  and  equipment  are  carried at cost less  accumulated  depreciation.
Depreciation is provided on the straight-line method over estimated useful lives
generally ranging from three to seven years. Intellectual property is carried at
cost less valuation  impairment expense and is amortized using the straight-line
method over its estimated useful life of three years. Leasehold improvements are
carried at cost and are  amortized  over the shorter of their  estimated  useful
lives or the related lease term (including options),  generally ranging from one
to six years.  Expenditures  for major  renewals  that  extend  useful  lives of
furniture,   equipment  and  improvements  are  capitalized.   Expenditures  for
maintenance  and  repairs  are  charged to expense as  incurred.  For income tax
purposes, depreciation is computed using the modified cost recovery system.

                                       12
<PAGE>

2. Summary of Significant Accounting Policies (continued)

Depreciation  expense for the nine months ended September 30, 2005, was $57,088.
Amortization expense for the nine months ended September 30, 2005, was $174,753.

Intellectual Property

The  Company's  intellectual  property  is  comprised  of  a  software  platform
purchased  with  Financial  Services,  Inc. in 2002.  The  Company  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 an impairment  exists.  The Company put the software into productive use in
October 2004 and began amortizing the asset as of that date.

Impairment of Long-Lived Assets

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

In the event that facts and  circumstances  indicate that the cost of long-lived
assets,  primarily  intellectual  property  and patents,  may be  impaired,  the
Company performs a  recoverability  evaluation.  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  value or fair
value, less costs of disposal.

Compensating Absences

Employees  of the company  are  entitled  to paid  vacation,  paid sick days and
personal days off, depending on job classification,  length of service and other
factors.  It is  impracticable to estimate the amount of compensation for future
absences,  and, accordingly,  no liability has been recorded in the accompanying
financial  statements.  The  company's  policy  is to  recognize  the  costs  of
compensated absences when actually paid to employees.

Convertible Notes

Statement of  Financial  Accounting  Standards  No. 150 (SFAS),  Accounting  for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity,  is effective for financial  instruments  entered into or modified after
May 31, 2003,  and  otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatory  redeemable financial
instruments of nonpublic entities.

This Statement  establishes  standards for how an issuer classifies and measures
certain  financial  instruments  with  characteristics  of both  liabilities and
equity.  It  requires  that an issuer  classify a financial  instrument  that is
within its scope as a  liability  (or an asset in some  circumstances).  Many of
those instruments were previously classified as equity. The Company has and will
continue to report convertible notes as liabilities.

                                       13
<PAGE>

2. Summary of Significant Accounting Policies (continued)

Stock-Based Compensation

Statement of  Financial  Accounting  Standards  (SFAS) No. 123,  Accounting  for
Stock-Based Compensation, 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.  The Company  periodically issues options to consultants
and members of the Board of Directors.  The estimated  value of these options is
determined in accordance  with SFAS No. 123 and expensed as the granted  options
vest to the grantees.

The price of any options granted pursuant to these grants is not to be less than
100  percent of the fair  market  value of the shares on the date of grant.  The
options expire one year from date of grant and are immediately vested. There was
no charge to expense for the value of the options  during the nine months  ended
September 30, 2005, as no options were issued.

Revenue Recognition

Sales consist of loans to third party investors in the secondary  market.  Sales
are generally  recognized at the time of funding,  provided that no  significant
vendor obligations exist and collections of accounts receivable are probable.

Advertising

Advertising costs are expensed as incurred.  For the nine months ended September
30, 2005, the Company did not incur any advertising costs.

Research and Development

Expenditures  for  research  activities  relating  to software  development  and
improvement are charged to operations as incurred.

Income Taxes

The Company  accounts for income taxes under the asset and  liability  method as
prescribed  by  Statement  of  Financial  Accounting  Standards  (SFAS) No. 109,
Accounting for Income Taxes. As such, deferred income tax assets and liabilities
are recognized for the future tax  consequences of the  differences  between the
financial statement carrying amount of existing assets and liabilities and their
respective tax bases.  Deferred  income tax assets and  liabilities are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary differences are expected to be recovered or settled.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  in the United States of America  requires  management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Accordingly, actual results could differ from
those estimates.

3. Intellectual Property

Since its inception, the Company entered into numerous agreements as a result of
having  acquired  certain  rights to  various  complex  intellectual  scientific
properties.  The Company  periodically  analyzes its investments in intellectual
property for impairment.

                                       14
<PAGE>

3. Intellectual Property (continued)

During the quarter ended June 30, 2003, in a non-arms  length  transaction  with
Robert George Krushinsky, a director of the Company, the Company 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 2002 as
well as all shares of Rockford Technology held for sale by the Company.

On November 19, 2002, in connection with the acquisition of Financial  Software,
Inc., the Company 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 host of disparate objectives as they relate
to a  person's  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.  The Company  recorded the software on its books at the seller's basis
of $1,398,020.  The Company engaged an experienced  software  developer based in
Palo Alto,  California to perform an  independent,  third party valuation of the
software during 2003.

During the fourth quarter of 2004, Silverado Financial,  Inc. began implementing
its FinanCenter  Software system, but in doing so found that the software was in
need  of  upgrades  in both  programming  and  technology.  With  that in  mind,
management  felt that it was  necessary  to impair  the  original  valuation  of
$1,398,020 down 50% to $699,010. Additionally, on November 24, 2004 the purchase
price of the intellectual property was renegotiated as follows: SRD Technologies
(former  owner of Financial  Services,  Inc.),  signed a debt  cancellation  and
release  agreement which included the release of any and all liabilities owed to
SRD Technologies,  the relinquishment of 574,953 shares of Silverado  Financial,
Inc.  stock,  and a payment for  auditing  expenses in the amount of $7,500.  An
additional   44,000   shares   were   relinquished   from  Mike  Shultz  in  the
re-negotiation. On the date of the agreement 618,953 shares were valued at $0.05
a share or $30,948.

In September  2005,  the Company  received the remaining  157,131  shares due to
them.  The note  payable of $275,000,  with  corresponding  accrued  interest of
$41,047 and $7,500 in accounts  payable  have been  reversed as of December  31,
2004 with a resulting impairment expense of $389,753.

The Company  placed the software  into service in October 2004 and is amortizing
the  software  over a three year period  commencing  upon the  in-service  date.
Amortization  expense for the nine months ended September 30, 2005 was $174,761.
Amortization  expense is estimated to be as follows for the years ended December
31:

          Year            Amount
          ----          --------
          2005          $233,003
          2006           233,003
          2007           174,761
                        --------
                        $640,767
                        ========

                                       15
<PAGE>

4. Acquisitions

On November 19,  2002,  the Company  acquired all of the issued and  outstanding
shares of Financial  Software,  Inc. (FSI), a New Jersey corporation  engaged in
the  development  of Internet  and  Intranet  financial  software in addition to
operating several financial industry publishing  websites.  This acquisition was
completed  on a share  for share  exchange  basis  for  4,400,000  shares of the
Company's  common  stock.  FSI was  acquired  in order to gain access to certain
proprietary software products owned by FSI, which the Company intends to further
develop and extend into comprehensive  mortgage platforms called  MortgageCenter
and FinanCenter.

Through  the  acquisition  of FSI,  the  Company  acquired  assets of $26,775 in
marketable securities,  $1,398,020 in intellectual property  (MortgageCenter and
FinanCenter  software),  and $1,904 in  computer  equipment.  The  Company  also
acquired  liabilities  of $61,796 in accounts  payable and $275,000  through the
assumption of a note payable.

On May 9, 2003 the Board of  Directors  approved  the  acquisition  of Silverado
Mortgage Corporation (SMC), a mortgage brokerage company,  from John Hartman for
729,452 restricted common shares. Mr. Hartman (President of Silverado Financial,
Inc.)  abstained from the vote. The  acquisition  was made at a trading value of
$127,654 which was the net asset value of SMC and the average  closing bid price
of the  Company  on the prior five  trading  days.  Mr.  Hartman's  holdings  of
Silverado  Financial,  Inc.  common  stock were 103,511  shares  (0.87% of total
shares  outstanding)  prior to  acquisition  and 832,963  shares (6.59% of total
shares outstanding) after the acquisition of SMC, respectively.

Through the acquisition of Silverado Mortgage Corporation , the Company acquired
total  assets of  $168,233,  consisting  of $33,963 in accounts  receivable  and
prepaid expenses,  $49,284 in computers and equipment, and $84,986 in furniture.
The Company also acquired  liabilities of $7,871 in accounts payable and $32,708
through the assumption of notes payable.

On April 29, 2005 the Board of Directors  approved the  acquisition  of Core One
Mortgage,  Inc.,  a  mortgage  brokerage  company  and fifty  percent of Liberty
Settlement  Services'  future net  profits  for  $3,000,000  in  combination  of
$1,000,000  of preferred  stock to convert to  $1,000,000  of common stock after
December 31, 2005,  but not later than January 15, 2006,  and a $2,000,000  note
payable with 8% interest, payable in monthly installments of $52,673.

Through the acquisition of Core One Mortgage,  Inc., the Company  acquired total
assets of $3,133,620  consisting of $129,467 of fixed assets, net of accumulated
depreciation, $5,227 prepaid expense, $17,400 security deposit and $2,981,526 in
goodwill.  The Company also acquired  liabilities of $13,620 in accounts payable
and incurred  120,000 in acquisition  costs.  Results of operations for Core One
Mortgage,  Inc. are included in the consolidated  financial statements as of the
purchase date of May 5, 2005.

                                       16
<PAGE>

4. Acquisitions  (continued)

Following  are pro  forma  amounts  assuming  that the  acquisition  was made on
January 1, 2005:

          Net sales                                      $ 3,277,062
          Cost of sales                                      508,453
                                                         -----------
          Gross profit                                     2,768,609

          Operating expenses
           Selling, general and administrative expense     3,176,026
           Depreciation expense                              231,841
                                                         -----------
          Total operating expenses                         3,407,867
                                                         -----------
          Operating loss                                    (639,258)

          Other income
           Interest income                                    13,893
           Investment income                                  51,297
                                                         -----------
          Total other income                                  65,190

          Loss before taxes                                 (574,068)
          Provision for income taxes                           6,581
                                                         -----------
          Net loss                                       $  (580,649)
                                                         ===========

Contingent Payments

The Company issued $1,000,000 of convertible preferred stock for the purchase of
Core One Mortgage,  Inc. as described  above.  The stock must be converted  into
common stock after  December 31, 2005,  but not later than January 15, 2006,  at
not less than $1,000,000  worth of the Company's common stock at the closing ask
price, as reported by www.nasdaq.com.  Should Core One Mortgage, Inc.'s earnings
before interest, taxes and depreciation (EBITDA) for the year ended December 31,
2005 be greater than $900,000, the convertible preferred stock will be increased
to 1.5 times the dollar value in excess of $900,000.  The Company can redeem the
convertible  preferred stock at any time prior to conversion,  for cash payments
of the unpaid principal balance due on that date.


5. Goodwill

Goodwill is assigned to specific  reporting  units and is reviewed  for possible
impairment at least annually or more  frequently upon the occurrence of an event
or when  circumstances  indicate  that a  reporting  unit's  carrying  amount is
greater than its fair value. Goodwill of $2,985,471 arose in connection with the
acquisition or Core One,  Mortgage,  Inc. No impairment loss has been recognized
in the reporting unit.


6. Accounts Payable

As of September 30, 2005,  the Company owes its vendors a total of $289,190,  of
which approximately $147,277 was outstanding over ninety days.


                                       17
<PAGE>

7. Equity Advance

As of September  30,  2005,  the Company had  received  advance  payments on the
issuance of common stock for $165,500.


8. Long-Term Debt

Notes Payable

Through the  acquisition  of Financial  Software,  Inc., the
Company became  obligated for the acquired  accounts payable
in the amount of $30,000.  In June 2003,  the Company issued
33,000  shares  of  stock at a value  of  $5,000  and a note
payable for $25,000 in satisfaction  of accounts  payable to
one of the FSI vendors. The note carries interest at 5.0%         $      25,000

On October 11, 2004 John E. Hartman returned 729,452 shares,
valued at $43,767,  of Silverado  Financial,  Inc.  stock to
allow the  Company the  capability  to issue more shares for
financing  transactions and services.  Silverado  Financial,
Inc. will satisfy the note  obligation  with  re-issuance of
shares and a 5% bonus of 36,472 shares, valued at $2,188.                43,767

During  September  2005, Sean E. Radetich loaned the Company
$22,617 to cover operating expenses.                                     22,617

Per the purchase agreement of Core One Mortgage, Inc. on May
5,  2005,  the  Company  issued  a  note  in the  amount  of
$2,000,000,  at 8.00%,  with  monthly  payments  of $62,673,
payable over three years,  with a final  payment of $491,505
on  March  6,  2008,  commencing  May  6,  2005.  As of  the
financial statement date,  $1,803,114 of the original amount
remains and $506,114 is the current portion.                          1,803,114
                                                                ---------------
                                                                      1,894,498
Notes payable - current portion                                        (531,114)
Notes payable - stockholder                                             (66,384)
                                                                ---------------
Notes payable - long term portion                                   $ 1,297,000
                                                                ===============


Minimum  future  commitments  under  notes  payable are as follows for the years
ended December 31,

              Year                   Amount
          --------------          ----------
              2005                $  214,155
              2006                   516,304
              2007                   559,157
              2008                   604,882
         and thereafter                --
                                  ----------
                                  $1,894,498
                                  ==========

                                       18
<PAGE>

8. Long-Term Debt (continued)

Warehouse Facility

On September 3, 2004, the Company's wholly owned subsidiary,  Silverado Mortgage
Corporation signed an agreement for a $2,000,000 mortgage warehouse and security
facility.

The warehouse  facility requires a demand note. The demand note, in the event of
a default, stipulates that any outstanding balance of the warehouse facility can
be called at any time, inclusive of interest. Interest is payable when loans are
sold (no later than 45 days) at 4.5% above the one month LIBOR rate. The note is
subject to mandatory prepayments and is collateralized by the mortgage loans and
other predetermined assets.

As of September 30, 2005 the outstanding balance was $524,300.


9. Operating Lease Commitments

During April 2004, the Company became  responsible  for a lease for 2,512 square
feet in an office building in Pleasanton,  California. The lease is for a period
of three years ending on May 31, 2007 with an option to renew for an  additional
three years.  The base rental  under the lease is $52,752 per annum  ($4,396 per
month)  during the first  twelve-month  period,  $54,259  per annum  ($4,522 per
month) for the second  twelve-month  period and  $55,766  per annum  ($4,647 per
month) during the third twelve-month  period. The lease provides for the Company
to pay its proportionate share of the landlord's common costs.

During  September  2004,  the Company became  responsible  for a lease for 6,000
square feet in an office  building in Campbell,  California.  The lease is for a
period of three years ending on October 31, 2007.  The Company rented more space
in the current period  resulting in an increase in lease costs and  obligations.
Because  of this,  an  amendment  to the lease went into  effect,  June 1, 2005,
setting the rent at $160,560 per annum  ($13,380 per month) during the next five
month period,  $169,500  ($14,125 per month) during the subsequent  twelve month
period and $178,380  ($14,865 per month)  during the final  eleven  months.  The
lease provides for the Company to pay its proportionate  share of the landlord's
common costs.

During  November  2004,  the Company  became  responsible  for a lease for 6,000
square feet in an office building in Phoenix, Arizona. The lease is for a period
of three years  ending on January 31,  2008.  The base rental under the lease is
$99,000 per annum  ($8,250 per month) during the first  thirty-six  month period
except the Company  shall pay $2,750 for the first ninety (90) days,  $4,125 for
the second  ninety  (90) days and $6,875 for the third  ninety  (90) days of the
lease. The lease provides for the Company to pay its proportionate  share of the
landlord's common costs.

During May 2005,  the Company  became  responsible  for a lease for 2,080 square
feet in an office building in Walnut Creek, California.  The lease period is for
a period of three years ending on May 31, 2008.  The base rental under the lease
is $58,656 per annum  ($4,888 per month)  during the first twelve month  period,
$59,904  annum the  following  twelve month period  ($4,992 per month),  $61,152
annum the next twelve month period  ($5,096 per month).  The lease  provides for
the Company to pay its proportionate share of the landlord's common costs.

                                       19
<PAGE>

9. Operating Lease Commitments - (continued)

As a result of the  acquisition of Core One Mortgage,  Inc., the Company assumed
lease  obligations for properties in several states. A lease for office space in
Libertyville,  Illinois  for a period of three  years  ending on May 31, 2007 is
$40,200 per annum ($3,350 per month)  throughout  the term of the lease. A lease
for office space in Wexford,  Pennsylvania for a period of three years ending on
September 30, 2008 is $93,555 per annum ($7,796 per month)  throughout  the term
of the lease. A lease for office space in Forest Hill Industrial Park,  Maryland
for a period of three years  ending on  September  30, 2007 is $33,000 per annum
($2,750 per month) throughout the term of the lease.

Lease expense for the nine months ended September 30, 2005 was $258,500.

Minimum  future  commitments  under all operating  leases are as follows for the
years ended December 31:

               Year                Amount
         ---------------    ----------------
              2005                $  141,465
              2006                   568,522
              2007                   495,432
              2008                   120,483
          and thereafter                --
                                  ----------
                                  $1,325,902
                                  ==========

10. Income Taxes

The  components of the provision for income tax consist of the following for the
nine months ended September 30, 2005:

          Current tax expense - state            $   1,600
          Prior tax expense - state                  1,600
          Deferred tax benefit:
          Federal                                  141,933
          California                                45,058
          Change in valuation allowance           (186,991)
                                                 ---------
          Total deferred tax expense                  --
                                                 ---------
          Provision for income taxes             $   3,200
                                                 =========

The Company's effective income tax rate is higher than what would be expected if
the  federal  statutory  rate were  applied  to loss from  operations  primarily
because of net operating losses deductible for financial reporting purposes that
are not deductible for tax purposes.  A full valuation allowance against the net
deferred  tax  assets  was  recorded  at June  30,  2005,  due to the  Company's
uncertainty as to future realization of income tax loss carryforwards.

A  reconciliation  of the  Company's  income tax  expense  rate to U.S.  federal
statutory rate for the nine months ended September 30, 2005 is as follows:

As of September 30, 2005, the Company had realized  federal net operating losses
of approximately  $8,825,215.  Future realization of the net deferred tax assets
is dependent on generating  sufficient taxable income prior to their expiration.
The net operating losses expire, as follows:

                                       20
<PAGE>

10. Income Taxes (continued)

              Expiration    Federal           State          State
                         ----------        ----------    ----------
                 2009        44,994
                 2010       379,485        $2,109,954
                 2011       461,101           318,228
                 2012       236,028            76,034
                 2013          --             522,756
                 2014          --             119,873    $  389,827
                 2018       861,526
                 2019       603,950
                 2020     3,670,269
                 2021       578,596
                 2022       126,723
                 2023       871,260
                 2024       991,283
                         ----------        ----------    ----------
                         $8,825,215        $3,146,845    $  389,827
                         ==========        ==========    ==========

11.    Loss Per Share

As of September 30, 2005, there were convertible notes with exercisable warrants
outstanding.   Outstanding  options,  warrants  and  convertible  securities  to
purchase  common  stock  were not  considered  in the  calculation  for  diluted
earnings per share for the nine months  ended  September  30, 2005,  because the
effect  of their  inclusion  would be  anti-dilutive.  A  reconciliation  of the
numerator and  denominator of the basic and diluted per share  calculations  for
the loss from continuing operations is as follows:

                                         Basic (Loss)         Diluted (Loss)
                    Net (Loss)             Per Share             Per Share
                 ------------------------------------------------------------
Loss               $ (803,670)           $ (803,670)           $ (803,670)
Shares                                   19,635,524            19,735,524
Per share                                   $ (0.04)              $ (0.04)



12.    Related Party Transactions

On May 9, 2003 the Board of  Directors  approved  the  acquisition  of Silverado
Mortgage  Corporation SMC, a mortgage  brokerage  company,  from John E. Hartman
(President of Silverado  Financial,  Inc.) for 729,452 restricted common shares.
Mr. Hartman abstained from the vote. The acquisition was made at a trading value
of $127,654  which was the net asset  value of SMC and the  average  closing bid
price of the Company on the prior five trading days. Mr.  Hartman's  holdings of
Silverado  Financial,  Inc.  common  stock were 103,511  shares  (0.87% of total
shares  outstanding)  prior to  acquisition  and 832,963  shares (6.59% of total
shares outstanding) after the acquisition of SMC, respectively.

On October 11, 2004 John E. Hartman returned 729,452 shares,  valued at $43,767,
of Silverado Financial,  Inc. stock to allow the Company the capability to issue
more shares for financing transactions and services.  Silverado Financial,  Inc.
will satisfy the note  obligation  with  reissuance  of shares and a 5% bonus of
36,472 shares, valued at $2,188.

During  September,  2005 Sean E.  Radetich  loaned the Company  $22,617 to cover
operating expenses.

                                       21
<PAGE>

13.    Contingencies

On  January  27,  2004 DL Pacific  Center LP (DL  Pacific)  filed a lawsuit  for
$40,444 plus costs and  attorney's  fees against the Company in San Diego County
Superior  Court.  The suit alleges  that,  after the  purchase of San  Francisco
Funding,  Inc.  (SFF) in November 2003,  the Company  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. The purchase was
never consummated. Silverado Financial Inc. has agreed to settle the lawsuit for
the nuisance value of $2,500.

Silverado Financial,  Inc. has filed a cross-complaint against SFF and its major
stockholders, Mr. and Mrs. Daniel Selis, for indemnity for the cost of defending
the Vener lawsuit, and punitive damages resulting from breach of contract, fraud
and/or interference with the Company's advantageous business relationships.

On May 12, 2004 The Subway.Com  filed for  arbitration for $60,000 plus interest
against the Company in the state of Florida.  The suit claims breach of contract
for stock promotion  services.  The Company believes it has meritorious  defense
and that no contract was ever consummated.  The August 2005 arbitration date has
been postponed.

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 contractor
for back wages of $10,938 and penalties of $288 for an  indeterminate  number of
days.  This case was  settled by  Silverado  on  November  21,  2005 for $10,000
payable in three payments in December 2005 and January 2006.

On August 17, 2005, a former loan  advisor  filed a lawsuit  against the Company
claiming he was not paid for $10,000 in commissions  he had earned.  The Company
has settled out of court agreeing to pay $1,400 to resolve the dispute.


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

Silverado Financial, Inc. (the "Company",  "We", "Us" and "Our") is incorporated
under the laws of the State of Nevada and based in Pleasanton, California in the
East San  Francisco Bay Area.  The Company  provides  first and second  mortgage


                                       22
<PAGE>

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

products  to  borrowers  in  California  and  Colorado   through  its  operating
subsidiary, Silverado Mortgage Corporation (SMC).

The  corporation  was  initially  formed on February 26, 1987 as Toledo  Medical
Corporation. The name was changed to Almaz Space Corporation on February 9, 1991
and to Ready When You Are Funwear,  Inc. on April 14, 1992. On December 30, 1994
a group of individuals  acquired  control of the Company.  On February 17, 1995,
they changed the name to Rhombic  Corporation.  On March 19,  2003,  the company
changed its name to Silverado Financial, Inc.

In November 2002, the Company  acquired  Financial  Software,  Inc. as the first
part of its strategy to enter the lucrative  consumer finance sector.  In May of
2003 the  Company  acquired  Realty  Capital  Corporation,  a  California  based
mortgage brokerage,  and renamed the wholly owned subsidiary  Silverado Mortgage
Corporation in August of 2004.

During the 1st Quarter the company had one wholly  owned  subsidiary:  Silverado
Mortgage Corporation ("SMC").

Silverado acquired Financial Software,  Inc. on November 19, 2002 in a share for
share exchange basis for 4,400,000 shares of common stock.  Financial  Software,
Inc. (FSI), a New Jersey corporation  engaged in the development of Internet and
Intranet  financial software in addition to operating several financial industry
publishing  websites.  Silverado acquired FSI in order to gain access to certain
proprietary  software  products owned by FSI which we intend to further  develop
and extend into a  comprehensive  back office  platform  necessary to accomplish
managements  business  objectives.  Financial  Software  has  been  merged  into
Silverado Financial, Inc. effective the first quarter of 2005.

On May 9, 2003,  Silverado  acquired Realty Capital  Corporation in exchange for
729,452  shares of restricted  common stock from John E. Hartman,  the President
and Chief  Executive  Officer of the  Company  and a  director.  The Company was
renamed  Silverado  Mortgage  Corporation  in August of 2004.  SMC operates as a
mortgage  brokerage  and mortgage  banking  company  licensed by the  California
Department of Real Estate and by the California  Department of Corporations as a
Consumer Finance Lender. SMC generated all of the Company's 2004 revenue through
its offices in Campbell and Pleasanton, California and Phoenix Arizona.

In addition to continuing, and expanding, the operation of SMC, other activities
have consisted of developing  the business  plan,  obtaining a warehouse line of
credit,  raising  capital,  business  plan  implementation  and  recruiting  and
training  sales people.  For the year ending  December 31, 2004, the Company had
revenues  of  $919,930,  and has  expensed  operating  costs  in the  amount  of
$1,590,650.  Historically,  the Company has had nominal cash  resources  and has
been largely  dependent on the direct financial support from a few shareholders,
directors and officers along with limited revenue to pay for cash  expenditures.
In addition,  the Company has been  dependent  on its  officers;  directors  and
certain key vendors accepting restricted common stock for their services.

BUSINESS OF THE ISSUER

General

Silverado  Financial  Incorporated  is a  mortgage  banking  company  focused on
providing  non-prime  borrowers,  individuals  who  generally do not satisfy the
credit,  documentation or other  underwriting  standards set by more traditional
sources  of  mortgage  credit,  with  access to  capital  for the  purchase  and


                                       23
<PAGE>

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

refinancing of one to four-family residential properties. The Company originates
mortgage loans, which include fixed and adjustable-rate loans, for purposes such
as debt consolidation,  refinancing, education, home improvement and real estate
purchase.

As the primary aspect of the Company's business and finance strategy,  Silverado
sells  its  loans to  third-party  investors  (correspondent  investors)  in the
secondary  mortgage market.  Presently the Company sells its loans through whole
loan sales to correspondent  investors, but as the Company grows it will dispose
of  its  loan  production   through  a  combination  of  whole  loan  sales  and
securitization.

The Company's mortgage business has two principal components.  First,  Silverado
makes  mortgage loans to individual  borrowers.  Each loan is a cash and expense
outlay for the Company,  because its total cost  incurred in  originating a loan
exceeds the fees it collects at the time it originates  the loan. At the time of
origination,  Silverado  either finances the loan by borrowing under a warehouse
line of credit,  or acts as an agent and  brokers  the loan to another  mortgage
lender.  Second, the Company sells the loans on a whole-loan basis, and uses the
net proceeds from these  transactions to repay its warehouse lines of credit and
for working capital.

Silverado currently operates 3 offices in California, corporate headquarters and
retail  sales  office in  Pleasanton,  California,  a sales  office in Campbell,
California,  a sales  office in Walnut  Creek  California  and a sales office in
Phoenix, Arizona.

Because of  Silverado's  focus on the  Non-Prime  borrower,  and the  subsequent
growth of that market  segment,  the Company is largely  insulated from interest
rate increases  unlike many of its competitors in the highly sensitive Prime "A"
paper market segment.

Strengths and Competitive Advantages

We believe that we have several strengths and competitive  advantages that allow
us to compete effectively in our business, including:

o Low Interest  Rate  Sensitivity:  Due to  Silverado's  focus on the  non-prime
borrower,  and the  subsequent  growth  of that  market,  Silverado  is  largely
insulated from increases in interest rates.

o Performance-Based  Compensation  Structure.  Our compensation  structure helps
keep fixed costs at a minimum and allows us to weather industry down-turns.

o Proprietary  Training Program. We have developed and implemented a proprietary
training  program,  which  broadens  the  hiring  pool and  helps to  accelerate
internal growth.

o Position as a Direct Lender. As the industry consolidates Silverado's position
as a direct  lender helps it to attract  employees  and insulates it against the
proposed regulatory changes

Competition

We face  competition  in the  business of  originating,  purchasing  and selling
mortgage  loans.  Our  competitors  include other  consumer  finance  companies,
mortgage   banking   companies,   commercial   banks,   credit  unions,   thrift


                                       24
<PAGE>

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

institutions,  credit  card  issuers  and  insurance  finance  companies.  Other
financial institutions have gradually expanded their lending capabilities.  Many
of these  companies have greater access to capital at a cost lower than our cost
of capital under our warehouse,  aggregation,  and asset backed commercial paper
facilities.  Federally chartered banks and thrifts can preempt some of the state
and  local  lending  laws  to  which  we  are  subject,  thereby  giving  them a
competitive advantage.  In addition, many of these competitors have considerably
greater technical and marketing resources than we have.

Competition  among  industry   participants  can  take  many  forms,   including
convenience in obtaining a loan,  customer  service,  marketing and distribution
channels, amount and term of the loan, loan origination fees and interest rates.
Additional  competition  may lower the rates we can  charge  borrowers,  thereby
potentially lowering gain on future loan sales and securitizations. In 2004, the
most  significant  form of  competition  was  pricing  pressure  among  mortgage
originators.  Some of our  competitors  lowered  rates and fees to  preserve  or
expand their market share.

FORWARD LOOKING STATEMENTS

Certain  statements  made in this  report on Form 10-QSB are  "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
statements.  Although we believe 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


                                       25
<PAGE>

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

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.

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 were 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


                                       26
<PAGE>

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

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
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.

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.  A signed  agreement was executed on
September 3, 2004 and we started  utilizing the warehouse and security  facility
on November 22, 2004.

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  reputation  reasons,  many whole loan buyers
elect not to  purchase  any loan  labeled as a "high cost" loan under any local,


                                       27
<PAGE>

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

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.

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


                                       28
<PAGE>

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

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
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.

                                       29
<PAGE>

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

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.

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


                                       30
<PAGE>

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

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
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


                                       31
<PAGE>

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

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)
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


                                       32
<PAGE>

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

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 whom 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
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 2004,  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


                                       33
<PAGE>

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

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
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 the third  parties or us 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


                                       34
<PAGE>

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

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.

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


                                       35
<PAGE>

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

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.

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,  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.

                                       36
<PAGE>

ITEM 3: CONTROLS AND PROCEDURES (continued)

(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.











                                       37
<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.  Silverado  has agreed to settle the
lawsuit.

On March 9, 2004 Robert E. Vener ("Vener") filed an amendment to his lawsuit for
$7,500 per month from November 2003 to March 2006 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
have agreed to settle the suit.

We have filed a cross-complaint against SFF and its major stockholder(s) Mr. and
Mrs.  Daniel Selis,  for indemnity for the cost of defending the Veneer lawsuit,
and  punitive   damages   resulting  from  breach  of  contract,   fraud  and/or
interference with our advantageous business  relationships because of: (1) SFF's
material  breaches  of the SFF  stock  purchase  agreement  and  SFF's  material
misrepresentations to us of SFF's liabilities and obligations, (2) SFF's written
false statements to its creditors that we had assumed their debts, and (3) SFF's
forwarding of its phone calls tour offices and directing their creditors to call
our offices concerning payment of their liabilities and obligations.  On May 12,
2004 The Subway.  Com filed for Arbitration for $60,000 plus interest against us
in the state of Florida.  The suit claims breach of contract for stock promotion
services.  The Company believes it has meritorious  defense and that no contract
was ever consummated.

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 contractor
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 November 24, 2004, SRD  Technologies  signed a debt  cancellation and release
agreement  which  included  the release of any and all  liabilities  owed to SRD
Technologies,  the relinquishing of 574,953 shares of Silverado Financial,  Inc.
(SLVO) stock, and a payment to be made by SRD Technologies for auditing expenses
in the amount of $7,500.  On the date of the agreement  the 574,953  shares were
worth $.05 a share or  $28,748.  The affect on our books would be the release of
debt in the form of a note  payable  in the  amount  of  $275,000  plus  accrued
interest of $41,047. The $7,500 payment would reduce our payable to our auditors
and there would be a reduction in shares issued and outstanding.

On November 24, 2004, John Shebanow signed a general  release  agreement,  which
included the  relinquishing of any and all shares of Silverado  Financial,  Inc.
held by himself (575,870 shares), friends and family and releases any and all of
Silverado  Financials liability to Mr. Shebanow on the date of the agreement the
575,870  shares  were worth  $0.05 a share or  $28,794.  The affect on our books
would  be a  reduction  in  accounts  payable  of  approximately  $20,660  and a
reduction in the number of shares issued and outstanding.

                                       38
<PAGE>

ITEM 2. CHANGES IN SECURITIES

On January 14, 2005 the Company  issued  410,000 S-8 shares in payment for legal
services  and as retainer for future  service to out  corporate  attorney  David
Kahn.  The value of the  securities  at the time was  $37,000.  The company also
issued 32,675  shares to Martin  Fisher for work on the  Company's  software the
value of the shares was $$2,950.  We also issued  20,750  shares to Allen Suzuki
for accounting  services the value of the shares was $1,867.50.  Juan Negron was
issued  4,572  S-8  share  in  payment  for  work  on   computers   and  network
infrastructure at a value of $1000.00.

On January 14, 2005 the Company  issued  10,000  shares of  restricted  stock in
exchange for furniture and fixtures for the Phoenix, Arizona of to Justin Berry.

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 pursuant to 18 U.S.C.  Section 1350,
     as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

31.2 Certificate of Chief Executive Officer and 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

Report on Form 8-K filed with the Security and  Exchange  Commission  on May 17,
2005 reporting Acquisition of CoreOne Mortgage and Liberty Settlement.


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
-------------------------------------
By: John E. Hartman
President, Chief Executive Officer
& Interim Chief Financial Officer

Date: December 22, 2005
                                       39
<PAGE>