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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-QSB
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 Commission File Number:
 0-25074
 PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST
  Maryland
    
    39-6594066(State or other jurisdiction of incorporation)
    
    (I.R.S. Employer Identification Number)1240 Huron Road, Cleveland, OH
    
    44115(Address of principal executive offices)
    
    (Zip code)
  
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PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST AND SUBSIDIARIES
FORM 10-QSB
INDEX
 PART I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheet  March 31, 2007 (unaudited)
    
    Page - 2 -Consolidated Statements of Operations  Three months ended March 31, 2007 and March 31, 2006 (unaudited)
    
    Page - 3 -Consolidated Statements of Cash Flows  Three months ended March 31, 2007 and March 31, 2006 (unaudited)
    
    Page - 4 -Notes to Consolidated Financial Statements (unaudited)
    
    Page - 5 -Item 2. Managements Discussion and Analysis or Plan of Operation
    
    Page - 11 -Item 3. Controls and Procedures
    
    Page - 16 -Part II. Other InformationItem 1. Legal Proceedings
    
    Page - 16 -Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    Page - 16 -Item 3. Defaults upon Senior Securities
    
    Page - 16 -Item 4. Submission of Matters to a Vote of Security Holders
    
    Page - 16 -Item 5. Other Information
    
    Page - 16 -Item 6. Exhibits
    
    Page - 16 -Signatures
    
    Page - 17 -EX - 31.1 Section 302 Certification of Chief Executive OfficerEX - 31.2 Section 302 Certification of Chief Financial OfficerEX - 32.1 CEO/CFO Certification Under 906 of Sarbanes-Oxley Act
 - 1 -




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Paragon Real Estate Equity and Investment Trust and Subsidiaries
Consolidated Balance Sheet
March 31, 2007
(unaudited)
 AssetsInvestments in equipment:Furniture, fixtures and equipment
    
    $
    5,370Accumulated depreciation
    
    
    (2,378
    )Net investments in equipment
    
    
    2,992Cash
    
    
    315,042Other assets, net
    
    
    11,803Total Assets
    
    $
    329,837Liabilities and Shareholders EquityLiabilities:Accounts payable and accrued expenses
    
    $
    47,485Total liabilities
    
    
    47,485Commitments and ContingenciesShareholders equity:Preferred A Shares  $0.01 par value, 10,000,000
authorized: 277,955 Class A cumulative
convertible shares issued and outstanding, $10.00
per share liquidation preference
    
    
    2,780Preferred C Shares  $0.01 par value, 300,000
authorized: 244,444 Class C cumulative
convertible shares issued and outstanding, $10.00
per share liquidation preference
    
    
    2,444Common Shares  $0.01 par value, 100,000,000
authorized; 442,565 shares issued and outstanding
    
    
    4,426Additional paid-in capital
    
    
    30,559,303Accumulated deficit
    
    
    (26,501,620
    )Treasury stock, at cost, 38,130 shares
    
    
    (800,735
    )Unearned compensation and trustees fees
    
    
    (2,809,246
    )Subscriptions receivable Preferred C Shares
    
    
    (175,000
    )Total shareholders equity
    
    
    282,352Total Liabilities and Shareholders Equity
    
    $
    329,837
  - 2 -




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Paragon Real Estate Equity and Investment Trust and Subsidiaries
Consolidated Statements of Operations
(unaudited)
 For the three months ended March 31,2007
    
    
    2006RevenuesInterest
    
    $
    1,872
    
    
    $
    1,773Total revenues
    
    
    1,872
    
    
    
    1,773ExpensesDepreciation
    
    
    269
    
    
    
    269General and administrative
    
    
    121,453
    
    
    
    165,691Total expenses
    
    
    121,722
    
    
    
    165,960Loss from continuing operations
    
    
    (119,850
    )
    
    
    (164,187
    )Discontinued operations:Income from discontinued operations of
residential properties
before allocation to
minority interest
    
    
    
    
    
    
    12,448Income allocated to minority interest
    
    
    
    
    
    
    (12,324
    )Net loss attributable to Common Shareholders
    
    
    (119,850
    )
    
    
    (164,063
    )Net loss attributable to Common Shareholders per
Common Share: Basic and Diluted
    
    $
    (0.27
    )
    
    $
    (0.37
    )Weighted average number of Common Shares
outstanding: Basic and Diluted
    
    
    442,565
    
    
    
    442,555Comprehensive loss:Net loss
    
    $
    (119,850
    )
    
    $
    (164,063
    )Other comprehensive loss:Unrealized gain on marketable securities
    
    
    
    
    
    
    6Comprehensive loss
    
    $
    (119,850
    )
    
    $
    (164,057
    )
  - 3 -




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Paragon Real Estate Equity and Investment Trust and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
 For the three months ended March 31,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (119,850
    )
    
    $
    (164,063
    )Adjustments to reconcile net loss to net cash used in
continuing operations:Compensation costs and trustees fees incurred
through the issuance of shares
    
    
    62,605
    
    
    
    16,531Compensation costs, trustees fees and legal costs
incurred through the issuance of options
    
    
    10,500
    
    
    
    19,250Depreciation
    
    
    269
    
    
    
    269Income from discontinued operations, net of
allocation to minority interest
    
    
    
    
    
    
    (124
    )Net change in assets and liabilities:Other assets, net
    
    
    4,045
    
    
    
    42,094Accounts payable and accrued expenses
    
    
    19,767
    
    
    
    (73,662
    )Net cash used in continuing operations
    
    
    (22,664
    )
    
    
    (159,705
    )Cash flows from investing activities:Cash proceeds from sale of marketable securities
    
    
    
    
    
    
    Purchase of equipment
    
    
    
    
    
    
    Net cash from investing activities
    
    
    
    
    
    
    Cash flows from financing activities:Cash proceeds from issuance of Preferred C shares
    
    
    125,000
    
    
    
    Net cash from financing activities
    
    
    125,000
    
    
    
    Net increase (decrease) in cash
    
    
    102,336
    
    
    
    (159,705
    )CashBeginning of period
    
    
    212,706
    
    
    
    340,024End of period
    
    $
    315,042
    
    
    $
    180,319
  - 4 -




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Paragon Real Estate Equity and Investment Trust and Subsidiaries
 Notes to Consolidated Financial Statements
(unaudited)
 Note 1  Organization
   Note 2  Basis of Presentation
 Consolidated Financial Statement Presentation
   Going Concern
   - 5 -




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Fair Value of Financial Instruments
  Note 3  Summary of Significant Accounting Policies
 Use of Estimates in the Preparation of Financial Statements
  Investments in Equipment
   YearsFurniture, fixtures and equipment
    
    
    3-7
 Cash
  Other Assets
  Revenue Recognition
  - 6 -




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Stock Based Compensation
 Share-Based
Payment Accounting for Stock Issued to Employees
 Income Taxes
    Note 4  Marketable Securities
   Note 5  Equity
  - 7 -




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Note 6  Loss Per Share
   - 8 -




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For the three months ended March 31,2007
    
    
    2006NumeratorLoss from continuing operations
    
    $
    (119,850
    )
    
    $
    (164,187
    )Discontinued operations:Income from discontinued operations of
residential properties before allocation to
minority interest
    
    
    
    
    
    
    12,448Income allocated to minority interest
    
    
    
    
    
    
    (12,324
    )Net loss attributable to Common Shareholders
    
    $
    (119,850
    )
    
    $
    (164,063
    )DenominatorWeighted average Common Shares outstanding
at March 31, 2007 and March 31, 2006,
respectively: Basic and Diluted
    
    
    442,565
    
    
    
    442,555Basic and Diluted EPSNet loss from continuing operations
    
    $
    (0.27
    )
    
    $
    (0.37
    )Discontinued operations:Income from discontinued operations of
residential properties before allocation
to minority interest
    
    
    0.00
    
    
    
    0.00Income allocated to minority interest
    
    
    0.00
    
    
    
    0.00Net loss attributable to Common
Shareholders:
Basic and Diluted
    
    $
    (0.27
    )
    
    $
    (0.37
    )
 Note 7  Commitments and Contingencies
 Liquidity
    Legal Proceedings
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Note 8  Discontinued Operations
   For the three monthsended March 31, 2006Revenues
    
    $
    163,926Operating expenses
    
    
    (88,288
    )Depreciation and amortization
    
    
    (23,476
    )Interest expense
    
    
    (39,714
    )Income from discontinued operations
    
    $
    12,448
 Note 9  Related Party Transactions
 Richton Trail Disposition and Previous Acquisition and Management Fees
   - 10 -




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 Overview
      - 11 -




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Brief History
  Forward-Looking Information
  
    
    Explanation of changes in the results of operations in the Consolidated Statements of
Operations for the three month period ended March 31, 2007 compared to the three month
period ended March 31, 2006.
    
    Our critical accounting policies and estimates that require our subjective judgment and
are important to the presentation of our financial condition and results of operations.
    
    Our primary sources and uses of cash for the three month period ended March 31, 2007,
and how we intend to generate cash for long-term capital needs.
    
    Our current income tax status.
   Results of Operations
 Comparison of the Three Month Periods Ended March 31, 2007 and 2006
  - 12 -




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Revenues from Operations
  Expenses from Operations
   Loss from continuing operations
  Discontinued operations
    Net loss attributable to Common Shareholders
  Critical Accounting Policies and Estimates
  - 13 -




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Valuation Allowance of Deferred Tax Asset
  Liquidity and Capital Resources
  Cash Flows
   Future Obligations
  - 14 -




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Long Term Liquidity and Operating Strategies
  Current Tax Status
   Interest Rates and Inflation
   Off-Balance Sheet Arrangements
  - 15 -




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ITEM 3. CONTROLS AND PROCEDURES
   PART II. OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  ITEM 5. OTHER INFORMATION
  ITEM 6. EXHIBITS
 Exhibits
 ExhibitNumber
    
    Exhibit Description31.1
    
    Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002
 Chief Executive Officer31.2
    
    Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002
 Chief Financial Officer32.1
    
    CEO/CFO Certification under Section 906 of Sarbanes-Oxley Act of 2002.
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SIGNATURES
  Paragon real estate equity and investment trustBy:
    /s/ James C. MastandreaDate: May 14, 2007
    
    James C. MastandreaChief Executive Officer Paragon real estate equity and investment trustBy:
    /s/ John J. DeeDate: May 14, 2007
    
    John J. DeeChief Financial Officer - 17 -