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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 June 30, 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  June 30, 2007 (unaudited)
    
    Page - 2 -Consolidated Statements of Operations  Six months ended
June 30, 2007 and June 30, 2006 (unaudited)
    
    Page - 3 -Consolidated Statements of Operations  Three months ended
June 30, 2007 and June 30, 2006 (unaudited)
    
    Page - 4 -Consolidated Statements of Cash Flows  Six months ended
June 30, 2007 and June 30, 2006 (unaudited)
    
    Page - 5 -Notes to Consolidated Financial Statements (unaudited)
    
    Page - 6 -Item 2. Managements Discussion and Analysis or
Plan of Operation
    
    Page - 12 -Item 3. Controls and Procedures
    
    Page - 18 -Part II. Other InformationItem 1. Legal Proceedings
    
    Page - 18 -Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    Page - 18 -Item 3. Defaults upon Senior Securities
    
    Page - 18 -Item 4. Submission of Matters to a Vote of Security Holders
    
    Page - 18 -Item 5. Other Information
    
    Page - 18 -Item 6. Exhibits
    
    Page - 18 -Signatures
    
    Page - 19 -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 ActEX-31.1EX-31.2EX-32.1
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Paragon Real Estate Equity and Investment Trust and Subsidiaries
 
 Consolidated Balance Sheet
June 30, 2007
(unaudited)
 AssetsInvestments in equipment:Furniture, fixtures and equipment
    
    $
    5,370Accumulated depreciation
    
    
    (2,646
    )Net investments in equipment
    
    
    2,724Cash
    
    
    349,230Other assets, net
    
    
    7,637Total Assets
    
    $
    359,591Liabilities and Shareholders EquityLiabilities:Accounts payable and accrued expenses
    
    $
    12,102Total liabilities
    
    
    12,102Commitments 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
    
    
    30,565,912Accumulated deficit
    
    
    (26,584,623
    )Treasury stock, at cost, 38,130 shares
    
    
    (800,735
    )Unearned compensation and trustees fees
    
    
    (2,742,715
    )Subscriptions receivable Preferred C Shares
    
    
    (100,000
    )Total shareholders equity
    
    
    347,489Total Liabilities and Shareholders Equity
    
    $
    359,591
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Paragon Real Estate Equity and Investment Trust and Subsidiaries
 
 Consolidated Statements of Operations
(unaudited)
 For the six months ended June 30,2007
    
    2006RevenuesInterest
    
    $
    4,579
    
    
    $
    3,103Total revenues
    
    
    4,579
    
    
    
    3,103ExpensesDepreciation
    
    
    537
    
    
    
    537General and administrative
    
    
    206,895
    
    
    
    261,129Total expenses
    
    
    207,432
    
    
    
    261,666Loss from operations
    
    
    (202,853
    )
    
    
    (258,563
    )Gain on sale of marketable securities
    
    
    
    
    
    
    777Loss from continuing operations
    
    
    (202,853
    )
    
    
    (257,786
    )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
    
    
    (202,853
    )
    
    
    (257,662
    )Net loss attributable to Common Shareholders per
Common Share: Basic and Diluted
    
    $
    (0.46
    )
    
    $
    (0.58
    )Weighted average number of Common Shares
outstanding: Basic and Diluted
    
    
    442,565
    
    
    
    442,558Comprehensive loss:Net loss
    
    $
    (202,853
    )
    
    $
    (257,662
    )Other comprehensive loss:Unrealized gain on marketable securities
    
    
    
    
    
    
    Comprehensive loss
    
    $
    (202,853
    )
    
    $
    (257,662
    )
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Paragon Real Estate Equity and Investment Trust and Subsidiaries
 
 Consolidated Statements of Operations
(unaudited)
 For the three months ended June 30,2007
    
    2006RevenuesInterest
    
    $
    2,707
    
    
    $
    1,330Total revenues
    
    
    2,707
    
    
    
    1,330ExpensesDepreciation
    
    
    269
    
    
    
    268General and administrative
    
    
    85,441
    
    
    
    95,438Total expenses
    
    
    85,710
    
    
    
    95,706Loss from operations
    
    
    (83,003
    )
    
    
    (94,376
    )Gain on sale of marketable securities
    
    
    
    
    
    
    777Net loss attributable to Common Shareholders
    
    
    (83,003
    )
    
    
    (93,599
    )Net loss attributable to Common Shareholders per
Common Share: Basic and Diluted
    
    $
    (0.19
    )
    
    $
    (0.21
    )Weighted average number of Common Shares
outstanding: Basic and Diluted
    
    
    442,565
    
    
    
    442,560Comprehensive loss:Net loss
    
    $
    (83,003
    )
    
    $
    (93,599
    )Other comprehensive loss:Unrealized gain on marketable securities
    
    
    
    
    
    
    Comprehensive loss
    
    $
    (83,003
    )
    
    $
    (93,599
    )
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Paragon Real Estate Equity and Investment Trust and Subsidiaries
 
 Consolidated Statements of Cash Flows
(unaudited)
 For the six months ended June 30,2007
    
    2006Cash flows from operating activities:Net loss
    
    $
    (202,853
    )
    
    $
    (257,662
    )Adjustments to reconcile net loss to net cash
used in continuing operations:Compensation costs and trustees fees incurred
through the issuance of shares
    
    
    125,245
    
    
    
    8,668Compensation costs, trustees fees and legal
costs incurred through the issuance
of options
    
    
    21,000
    
    
    
    37,332Depreciation
    
    
    537
    
    
    
    537Income from discontinued operations, net of
allocation to minority interest
    
    
    
    
    
    
    (124
    )Gain on sale of marketable securities
    
    
    
    
    
    
    (777
    )Net change in assets and liabilities:Other assets, net
    
    
    8,211
    
    
    
    101,445Accounts payable and accrued expenses
    
    
    (15,616
    )
    
    
    (68,021
    )Net cash used in continuing operations
    
    
    (63,476
    )
    
    
    (178,602
    )Cash flows from investing activities:Cash proceeds from sale of marketable securities
    
    
    
    
    
    
    1,953Net cash from investing activities
    
    
    
    
    
    
    1,953Cash flows from financing activities:Cash proceeds from issuance of Preferred C shares
    
    
    200,000
    
    
    
    Net cash from financing activities
    
    
    200,000
    
    
    
    Net increase (decrease) in cash
    
    
    136,524
    
    
    
    (176,649
    )CashBeginning of period
    
    
    212,706
    
    
    
    340,024End of period
    
    $
    349,230
    
    
    $
    163,375
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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
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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
  Stock Based Compensation
 Share-Based Payment
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Accounting for Stock Issued to Employees
 Income Taxes
    Note 4  Marketable Securities
   Note 5  Equity
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Note 6  Loss Per Share
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For the six months ended June 30,2007
    
    
    2006NumeratorLoss from continuing operations
    
    $
    (202,853
    )
    
    $
    (257,786
    )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
    
    $
    (202,853
    )
    
    $
    (257,662
    )DenominatorWeighted average Common Shares outstanding
at June 30, 2007 and June 30, 2006,
respectively:Basic and Diluted
    
    
    442,565
    
    
    
    442,558Basic and Diluted EPSNet loss from continuing operations
    
    $
    (0.46
    )
    
    $
    (0.58
    )Net loss attributable to Common
Shareholders:Basic and Diluted
    
    $
    (0.46
    )
    
    $
    (0.58
    )
 Note 7  Commitments and Contingencies
 Liquidity
    Legal Proceedings
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Note 8  Discontinued Operations
   For the six monthsended June 30, 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
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 Overview
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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 six month period ended June 30, 2007 compared to the six month period
ended June 30, 2006.
    
    Explanation of changes in the results of operations in the Consolidated Statements of
Operations for the three month period ended June 30, 2007 compared to the three month
period ended June 30, 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 six month period ended June 30, 2007, and
how we intend to generate cash for long-term capital needs.
    
    Our current income tax status.
   Results of Operations
 Comparison of the Six Month Periods Ended June 30, 2007 and 2006
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Revenues from Operations
  Expenses from Operations
   Loss from continuing operations
  Discontinued operations
    Net loss attributable to Common Shareholders
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Comparison of the Three Month Periods Ended June 30, 2007 and 2006
 Revenues from Operations
  Expenses from Operations
   Loss from continuing operations
  Net loss attributable to Common Shareholders
  Critical Accounting Policies and Estimates
  Valuation Allowance of Deferred Tax Asset
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Liquidity and Capital Resources
  Cash Flows
   Future Obligations
  Long Term Liquidity and Operating Strategies
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Current Tax Status
   Interest Rates and Inflation
   Off-Balance Sheet Arrangements
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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: August 6, 2007
    
    
    
    James C. MastandreaChief Executive OfficerParagon real estate equity and investment trustBy:
    
    /s/ John J. DeeDate: August 6, 2007
    
    
    
    John J. DeeChief Financial Officer
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