U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                  Form 10-QSB/A
                                 Amendment No. 1

                                   (Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

                  For the fiscal period ended October 31, 2006

          [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

       For the transition period from __________________ to ______________

                         Commission file number: 1-14219

                      Transnational Financial Network, Inc
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)



California                                                          94-2964195
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation  (IRS Employer Identification No.)
or organization)

401 Taraval Street, San Francisco, CA                                 94116
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

                                 (415) 242-7800
-------------------------------------------------------------------------------
                         (Registrant's telephone number)



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

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (Check one):

Large accelerated filer      Accelerated filer       Non-accelerated filer X

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

Yes _X  No ____
     --

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of
common equity as of December 4, 2006. 10,248,005


<PAGE>




                      TRANSNATIONAL FINANCIAL NETWORK, INC.
                                October 31, 2006
                                    UNAUDITED





                                TABLE OF CONTENTS

PART I.    FINANCIAL INFORMATION

                                                                      Page
Item 1.  Financial Statements

   Condensed Balance Sheet as of October 31, 2006 - unaudited         F  2-3
   Condensed Statements of Operations for the three and six months
     ended October 31, 2006 and 2005 - unaudited                      F 4
   Condensed Statements of Cash Flow for the six months ended
   October 31, 2006 and 2005 - unaudited                              F 5
   Notes to the Condensed Financial Statements                        F 6-13

Item 2   Management's Discussion and Analysis of Financial
   Condition and Results of Operations                                MD  1 - 8

Item 3.  Controls and Procedures                                      O-1

Part II. OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders          O-1

Item 6.  Exhibits and Reports on Form 8K                              O-1



Signatures                                                            O-2

                                      F-1

<PAGE>



PART I. FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS

                      TRANSNATIONAL FINANCIAL NETWORK, INC.
                             CONDENSED BALANCE SHEET
                             As of October 31, 2006

                                   (Unaudited)


ASSETS

Current Assets:                                              As Restated
                                                             -----------

Cash and Cash Equivalents                                    $   1,389,792
Restricted Cash                                                    125,000
Restricted - Certificate of Deposit                                900,000
Short-term Mortgage-related Receivables, net of allowance
   for loan loss of $203,740                                       459,932
Mortgage Loans Held for Sale                                     1,156,741
Prepaid Expenses                                                   239,934
Fair Value of Financial Instruments                                18,009
                                                                   ------

Total Current Assets                                             4,289,408
                                                                 ---------

Fixed Assets:
Furniture & Fixtures                                              997,018
Leasehold Improvements                                             98,234
Accumulated Depreciation                                       (1,015,844)
                                                              -----------

Total Fixed Assets                                                 79,408
                                                                   ------

Other Assets:
Investment in RML                                               1,196,052
Goodwill                                                          459,934
Other Assets                                                      205,503
                                                                  -------

Total Other Assets                                              1,861,489
                                                                ---------

TOTAL ASSETS                                                   $6,230,305
                                                                =========



              See accompanying notes to these financial statements.
                                       F-2
<PAGE>





                      TRANSNATIONAL FINANCIAL NETWORK, INC.
                             CONDENSED BALANCE SHEET
                             As of October 31, 2006

                                                     (Unaudited)


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:                                           As Restated
                                                               -----------

Accounts Payable and Other Liabilities                         $   305,401
Accrued Interest                                                    59,374
Income Taxes Payables                                                1,200
Fair Value of Financial Instruments                                    988
Short-term portion of Loans Payable                                263,726
Short-term portion of Subordinated Debt                          1,000,000
                                                               -----------

Total Current Liabilities                                        1,630,689
                                                                 ---------

Long-Term Liabilities:

Loans Payable                                                     162,500
Subordinated Debt                                               2,737,700
                                                              -----------

Total Long-Term Liabilities                                     2,900,200
                                                              -----------


STOCKHOLDERS' EQUITY


Preferred stock, no par value: 2,000,000 shares
   authorized; no shares issued or outstanding                      -
Common stock, no par value: 20,000,000 shares
   authorized; 10,248,005 shares issued and outstanding
   at October 31, 2006.                                       15,883,802
Accumulated deficit                                          (14,184,386)
                                                             -----------
Total Stockholders' Equity                                   1,699,416
                                                             -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $   6,230,305
                                                               =========


              See accompanying notes to these financial statements.
                                       F-3

<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

                For the Periods Ending October 31, 2006 and 2005

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                   Three Months Ended 10-31                  Six Months Ended 10-31
                                                   ------------------------                  ----------------------
                                                 2006         2005    % Chg              2006         2005    % chg
                                                 ----         ----    -----              ----         ----    -----
                                            As Restated                             As Restated

Revenue:

<S>                                       <C>          <C>          <C>           <C>          <C>          <C>
Net Gain on Sale of Loans                  $  835,917   $1,394,892   -40.1%        $2,026,006   $3,291,919   -38.5%
Production Income                           1,259,657    1,524,186   -17.4%         2,575,381    3,019,037   -14.7%
Other Income                                    6,702       49,721    86.5%            12,383       70,004   -82.3%

Total Revenue                               2,102,276    2,968,799   -29.2%         4,613,770    6,380,960   -27.7%

Direct Expenses:

Commissions & Production Incentives           864,745      921,874    -6.2%         1,730,677    1,965,627   -12.0%
Production Expenses                           253,873      208,319    21.9%           598,889      417,099    43.6%
Loan Loss Expense                             589,227          -                      589,227          -     -18.9%
Early Loan Pay-off Penalties                   36,000                                  38,500       15,000   156.7%
Pair-Off Fees                                       -           -                           -            -

Total Direct Expenses                       1,743,845    1,130,193    54.3%         2,957,293    2,397,726    23.3%

Interest Income (Expenses):

Interest Income from loans in warehouse       228,166      353,418   -35.4%           487,559      821,788   -40.7%
Interest Expense on loans in warehouse       (239,676)    (309,237)  -22.5%          (505,456)    (714,978)  -29.3%
Warehouse transaction fees                    (22,875)     (31,700)  -27.8%           (54,409)     (77,174)  -29.5%

Net warehouse interest income (expense)       (34,385)      12,481  -375.5%           (72,306)      29,636       nm


Interest Expense - Subordinated Debt          (93,446)     (87,081)    7.3%          (184,763)    (174,162)    6.1%

Net Interest Income (Expense)                (127,831)     (74,600)   71.4%          (257,069)    (144,526)   77.9%

Gross Profit on Mortgage Activities           230,600    1,764,006   -86.9%         1,399,408    3,838,708   -63.5%

Indirect Expenses:

Salaries & Benefits                           867,822    1,221,904   -29.0%         1,832,009    2,340,700   -21.7%
General & Administrative                      700,243      520,847    34.4%         1,459,596    1,107,125    31.8%
Occupancy                                     187,016      175,502     6.6%           370,442      350,143     5.8%
Depreciation and Amortization                  22,785       17,960    26.9%            45,570       36,116    26.2%

Total Indirect Expenses                     1,777,866    1,936,213    -8.2%         3,707,617    3,834,084    -3.3%

Other Interest Income (Expense)                22,885       24,649    -7.2%            45,821       43,022     6.5%
Chg in RML Investment                          (2,309)           -       nm            (2,309)           -       nm
Chg in fair value of financial instruments     22,150       (4,754)      nm            11,862       42,425       nm
                                               ------       -------                    ------       ---------------
Total Other Income (Expense)                   42,726       19,895  -114.3%            55,374       85,447   -35.2%
Net Operating Income (Loss)               $(1,504,540)   $(152,312)      nm       $(2,252,835)     $90,071       nm

Basic net income (loss) per share             $(0.15)      $(0.02)                    $(0.22)        $0.01
Fully diluted income (loss) per share         $(0.15)      $(0.02)                    $(0.22)        $0.01

Weighted-average shares outstanding

Basic                                      10,248,005    6,791,360                 10,248,005    6,791,360
Diluted                                    10,248,005    6,791,360                 10,248,005    6,795,905

</TABLE>


              See accompanying notes to these financial statements.
                                       F-4


                      TRANSNATIONAL FINANCIAL NETWORK, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
               For the Six Months Ended October 31, 2006 and 2005

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                         2006                      2005
                                                                  ------------------         -----------------
                                                                  As Restated

Cash flows from operating activities:


<S>                                                               <C>                        <C>
Net (Loss) Income                                                 $       (2,252,835)        $          90,071
Adjustments to reconcile net (loss) income to net cash
   provided (used) by operating activities:
     Depreciation & amortization                                              45,570                    36,116
     Provision for early loan payoffs                                                                   (5,000)

     Change in Fair Value of Financial Instruments                           (11,863)                  (42,425)
Net effect of changes in assets and liabilities:
     Other assets                                                            (14,641)                   (3,150)
     Prepaid expenses                                                       (101,413)                        -
     Accrued interest payable                                                 18,102                    13,913
     Accounts payable and other liabilities                                 (136,524)                  (96,847)
     Loans payable                                                           408,899                         -

Net effect of changes in mortgage lending activities:

     Short-term mortgage related receivable                                  345,490                  (228,955)
     Mortgage loans originated for sale                                 (278,118,844)             (230,456,551)
     Proceeds from sales of mortgage loans                               278,003,044               231,287,871
                                                                     ---------------           ---------------

Net cash (used) provided by operating activities:                         (1,815,015)                  595,043
                                                                     ----------------          ---------------
Cash flows from investing activities:


Purchases of property and equipment                                          (10,997)                  (49,106)

Proceeds from Securities Held to Maturity                                 (1,196,052)                        -
                                                                     ----------------          ---------------
Net cash (used) by investing activities:                                  (1,207,049)                  (49,106)
                                                                     ---------------           ----------------
Cash flows from financing activities:

Financing Provided for Insurance                                             (22,547)                        -
Common Stock Issued                                                        2,419,652                         -
Due Diligence Fee                                                            (97,888)                        -
Stock Options Exercised                                                        3,000                         -
                                                                               -----

Net cash provided by financing activities:                                 2,302,217                         -
                                                                     ---------------           ---------------


Net (decrease) increase in unrestricted
     cash and cash equivalents                                              (719,847)                  545,937

Unrestricted cash and cash equivalents, beginning of period                2,109,639                 1,585,034
                                                                     ---------------           ---------------

Unrestricted cash and cash equivalents, end of period             $        1,389,792         $       1,343,135
                                                                     ===============           ===============

Interest paid                                                     $          632,969         $         813,044
Income taxes paid                                                 $               -0-        $              -0-


              See accompanying notes to these financial statements.
                                       F-5


<PAGE>



Note 1 - Description of Operations and Summary of Significant Accounting Policies

The accompanying financial statements of Transnational Financial Network, Inc.
(the "Company") as of and for the six-month periods ended October 31, 2006 and
2005 are unaudited and have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and financial
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations.
Accordingly, these unaudited condensed financial statements should be read in
conjunction with the audited financial statements included in the Company's Form
10-KSB for the year ended April 30, 2006, in addition to our most recently filed
Form 8-K relating to non-reliance on previous financial statements as well as
Note 9 - Restatements. These unaudited statements include all adjustments,
consisting only of normal recurring accruals, which are, in the opinion of
management, considered necessary for a fair presentation of financial position
and results of operations. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from
those estimates. The results of operations of the Company for the six-months
ended October 31, 2006 and 2005 are not necessarily indicative of the results to
be expected for the full year. The Company operates in one business segment -
mortgage banking.


Note 2 - Summary of Significant Accounting Policies

Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make certain estimates and assumptions, including the
depreciable lives of assets, the fair value of goodwill and financial
derivatives, and the realizable portion of deferred tax assets, that affect the
reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers cash equivalents to be short-term, highly liquid investments
used in its cash management activities and generally having a remaining maturity
of three months or less from the date of purchase.

Income Taxes - The Company uses the asset and liability method in accounting for
deferred income taxes. Deferred tax assets and liabilities are calculated by
applying applicable tax laws to the differences between the financial statement
base and the tax base of assets and liabilities. The effect on deferred taxes of
a change in tax rates is recognized in income in the period that includes the
enactment date.

Stock-Based Compensation - The Company follows Accounting Points Bulletin (APB)
25 in accounting for its employee stock options. The disclosure provisions of
Statement of Financial Accounting Standards (SFAS) 148 have been incorporated
into these financial statements and accompanying footnotes.

The following table illustrates the effect on net (loss) income that would have
resulted if the Company had applied the fair value recognition provisions of
Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation,
as amended by SFAS 148, Accounting for Stock-Based Compensation - Transition and
Disclosure, to stock-based employee compensation:

                                       F-7


<PAGE>


                      Transnational Financial Network, Inc.

                    Notes to Financial Statements (Continued)


<CAPTION>

                                   Three Months Ended              Six Months Ended
                                   ------------------              ----------------
                                 October 31   October 31          October 31    October 31
                                   2006         2005                2006          2005
                                   ----         ----                ----          ----

                                  As Restated                        As Restated
Net (loss) income:
<S>                             <C>             <C>             <C>                 <C>
As reported                     (1,504,540)     (152,312)       (2,252,835)         90,071

Deduct:  fair value amount                0             0                 0              0
                                          -            --                 -              -
Pro forma                       (1,504,540)     (152,312)       (2,252,835)         90,071

Basic (loss) income per common
  share:

As reported                           (0.15)       (0.02)             (0.22)         0.01
Deduct:  fair value amount             0.00         0.00               0.00          0.00
                                       ----         ----               ----          ----
Pro forma                             (0.15)       (0.02)             (0.22)         0.01

Diluted (loss) income per common
  share:

As reported                           (0.15)       (0.02)             (0.22)         0.01
Deduct:  fair value amount             0.00         0.00               0.00          0.00
                                       ----         ----               ----         -----
Pro forma                             (0.15)       (0.02)             (0.22)         0.01
</TABLE>


There were no options granted during the quarter ended October 31, 2005. As
mentioned in Note 6 below, the Board of Directors on March 10, 2005, elected to
accelerate the vesting of all outstanding options as of that date. All
outstanding options were fully vested as of April 30, 2005.

Reclassification - With the reexamination of the application of SFAS 133 and
related pronouncements to our operations, we have made the following changes to
the form of our presentation:

-             The balance sheet shows both the asset and liability amounts
              related to SFAS 133 calculations with respect to mortgage-related
              financial instruments. In the past these two figures were netted
              against one another and shown as a net amount.

-             The income statement has been moved back to the presentation used
              prior to April 30, 2005. It is now reported as a separate category
              in "Other Income (Expense)" below the operating income line
              wherein we report both non-warehouse interest income and changes
              in fair value of financial instruments.

Note 3 - Financing Facilities

As of October 31, 2006, the Company had a maximum mortgage loan financing
capacity of $75 million through two master sale agreements, or warehouse lines
of credit. Under these arrangements, the lending financial institutions purchase
a 100% loan participation interest in each loan upon the Company obtaining a
firm forward sale delivery commitment from investors and upon the financial
institutions' approval of the loan based on their underwriting criteria. The
Company recognizes income from loans transferred under these lines as a gain on
sale immediately upon the purchase and funding of the loans by the financial
institutions.

In connection with these agreements, the Company may be required to repurchase
certain loans that, subsequent to acquisition by the financial institutions,
fail to meet certain representations and warranties set forth in the agreements
at the date of the sale. During the six-month period ended October 31, 2006 the
Company was required to repurchase three loans in the total amount of $395,500.
All of the loans were refinanced by the borrowers


                                      F-8
<PAGE>

and the Company recovered its entire principal, as well as the direct and
carrying costs associated with these loans. During the six-month period ended
October, 2004 the Company was required to repurchase one loan in the amount of
$295,548Loan interest charges incurred in connection with the purchase of loans
are estimated and recognized as a reduction in sales proceeds immediately upon
the loan being transferred. Loan interest expense is calculated based on the
number of days the loan remains with the financial institution, until it is
ultimately resold to a third party investor. During the intervening period the
Company sub-services the loans on behalf of the financial institutions.

The first master sale agreement provides a credit facility of $15 million as of
October 31, 2006. Under this arrangement, an additional bulge capacity of $20
million is available if needed, bringing the total capacity under this
arrangement to $35 million. The Company has not used this interim bulge capacity
to date. Interest on the $15 million portion of the line is at the Prime Rate or
3.99%, whichever is higher. Prime was 8.25% at October 31, 2006. Interest on the
remaining $20 million of the line is 0.05% higher than that charged on the $15
million portion. The Company is required to maintain a non-interest bearing cash
collateral deposit with this lender of $100,000, in addition to $900,000
interest-bearing twelve-month certificate of deposit, which are included in the
balance sheet as restricted funds.

The second master sale agreement provides a credit facility of $40 million as of
October 31, 2006. Interest on the facility is at 1-month LIBOR plus a margin
ranging from 1.875% to 2.50%. The rate paid by the Company on this line as of
October 31, 2005 was between 7.19% and 7.82%. The Company is required to
maintain a non-interest bearing cash collateral deposit with this lender of
$25,000, which has been included as restricted cash in the balance sheets.

These two master sale agreements are each for a one-year period and are
typically renewed annually. However, the agreements give each party the right to
terminate the agreement upon 30 days' written notice.

These financing facilities have various customary covenants including minimum
liquidity, profitability and net worth requirements, and limitations on other
indebtedness. If we fail to comply with any of these covenants or otherwise
default, the lender has the right to terminate the facility and require
immediate repayment that may require sale of the collateral at less than optimal
terms. As of October 31, 2006, the Company was not in compliance with its net
income covenant but anticipates compliance prior to its fiscal year end, April
30, 2007.

The CEO and the President of the Company have both personally guaranteed the
above financing facilities.

Note 4 - Goodwill

Goodwill is attributable to the purchase of the Company's Campbell branch
(formerly LRS, Inc.) in 1999.

Note 5 - Subordinated Debt

As of October 31, 2006, the Company had a total of $3,737,700 of subordinated
debentures outstanding, of which $1,000,000 represents the short-term portion.
In January, 2005, we received $2,687,700 of convertible subordinated debt that
is due on January 12, 2015, bears interest at 10 % and is convertible into
common shares at $1.00 per share. The remaining $1,050,000 of subordinated debt
bears interest at 10%, and has maturities ranging from October 31, 2006 to
October 1, 2007.

Subordinated debt interest expense of $93,446 and $87,081 was incurred in the
three-month periods ended October 31, 2006 and 2005, respectively. On May 18,
2006, the Company agreed to modify the terms of its outstanding 8.5% convertible
subordinated notes due 2015. The interest rate was raised to 10%, in return the
Company received permission to raise up to $5 million of equity on whatever
terms the Board of Directors deems appropriate without triggering the conversion
price reset feature of the notes.

                                      F-9
<PAGE>

Note 6 - Stock Option Programs and Warrants to Purchase Common Stock

On March 10, 2005, the Board of Directors of the Company accelerated the vesting
of all outstanding options, such that on that date, all outstanding options are
fully vested. The Company accelerated the vesting of the options principally to
avoid the administrative complexities of required disclosures associated with
SFAS 123. The Board of Directors continues to evaluate the situation with
respect to future option issuance. The acceleration of options resulted in the
immediate vesting of options to purchase 228,989 shares of the Company's common
stock. Using the intrinsic value method for valuing these accelerated employee
options, compensation expense of $2,010 was recognized in the year ended April
30, 2005. Using the fair value method for valuing these accelerated independent
contractors' options, an additional $4,402 in expense was recognized in the year
ended April 30, 2005.

Information about stock options outstanding as of October 31, 2006 is summarized
as follows:

<TABLE>
<CAPTION>

                                                                       Weighted                           Weighted
                                                                        Average                            Average
                                                       Average         Exercise                           Exercise
                  Range of                            Remaining        Price of                           Price of
                  Exercise           Options         Contractual        Options           Options          Options
                   Prices          Outstanding      Life in Years     Outstanding       Exercisable      Exercisable
                   ------          -----------      -------------     -----------       -----------      -----------

<S>             <C>     <C>          <C>                <C>              <C>              <C>               <C>
                $0.22 - $1.00        692,345            6.04             $0.73            692,345           $0.73
                $1.01 - $2.45        243,201            7.23             $1.24            243,201           $1.24
                    $7.50            258,000            3.53             $7.50            258,000           $7.50
                                     -------                                              -------
                                    1,193,546           6.15             $2.30           1,193,546          $2.30
                                    =========                                            =========
</TABLE>
As of October 31, 2006, the Company had options outstanding under the programs
described herein.

The Company has two stock option plans: the 1998 Stock Compensation Plan ("1998
Plan") for employees and the 2000 Stock Incentive Plan ("2000 Plan") for
directors, officers and other employees which replaced the 1998 Plan in February
2000.

Options issued and outstanding from the 1998 Plan will continue to be honored,
but no additional options may be issued under the 1998 Plan. As October 31,
2006, there were a total of 18,000 share options outstanding under the 1998
Plan, all with an exercise price of $7.50 per option, which expire in June 2009.


In March 1999, four Directors of the Company were granted 240,000 non-qualifying
options to purchase common stock at an exercise price of $7.50 per share. The
options were vested on the grant date and expire ten years from the date of
issuance. Of the total grant, 180,000 options may be exercised only in the event
of a change in control as defined in the option agreement. There are no
forfeiture provisions associated with the options granted, accordingly, the
option granted to three of the four directors who subsequently resigned remain
outstanding until they are exercised or expire.

In June 2002, the Board of Directors of the Company unanimously granted to
Joseph Kristul, the Chief Executive Officer of the Company, an option to
purchase 300,000 shares of the Company's common stock at an exercise price of
$0.73 per share. The shares will be unregistered. The options are vested as of
April 30, 2005 and as noted above expire in four years. Under the 2000 Plan, a
total of 750,000 shares were initially reserved. The share reserve increases by
4% of total common shares outstanding each year, beginning on January 1, 2001.
The maximum annual increase in the share reserve is limited to 400,000 shares.

Accordingly, the following table is a roll forward of the share reserve limit
through October 31, 2006:


                                                           Number of Options

                  Initially Reserved                         750,000
                  January 1, 2001                            171,172
                  January 1, 2002                            205,503
                  January 1, 2003                            270,407
                  January 1, 2004                            272,640
                  January 1, 2005                            271,654
                                                         -----------
                  Reserve amount at October 31, 2005       1,941,376

                                      F-11

<PAGE>

The table below summarizes aggregate activity for all options programs for the
three-month period ended October 31, 2006:

                                                 All Programs
                                                 -------------------------------
                                                                       Weighted
                                                                        Average
                                                   Stock               Exercise
                                                  Options                Price
                                               -------------          ---------


Outstanding at April 30, 2006                    1,193,546               $2.30
Grants and Adjustments                               -                     -
Forfeitures                                          -                     -
                                               -----------              -------
Outstanding at October 31, 2006                  1,193,546               $2.30
                                                 =========               =====


                                                   Stock               Exercise
                                                  Warrants               Price

Outstanding at April 30, 2006                        45,000             1.32
Grants and Adjustments                            1,650,000             $.70
                                                  ---------             ----
Outstanding at October 31, 2006                   1,695,000             $.72
                                               =========                ====


As of October 31, 2006, there were 1,695,000 warrants to purchase shares of the
Company's common stock outstanding. The exercise prices of the warrants ranged
from $0.55 to $7.50. The warrants outstanding as of April 30, 2006 have
expiration dates of January 2007 and November 2008. The warrants issued in the
current quarter expire in June 2009.


Note 7 - Basic and Diluted Net Income (Loss) Per Share

Basic net income (loss) per share is based on net income (loss) divided by the
weighted-average common shares outstanding. Diluted net income (loss) is
computed based on the weighted-average number of common shares outstanding
adjusted for potentially dilutive securities, which include stock options,
warrants and contingently convertible subordinated debt. The computations of
basic and diluted net income per share are as follows:

<TABLE>

<CAPTION>


                                                         Three Months Ended                  Six Months Ended
                                                         ------------------                  ----------------
                                                      October 31      October 31         October 31       October 31

                                                          2006           2005                2006           2005
                                                          ----           ----                ----           ----

<S>                                                  <C>              <C>               <C>                <C>
Net (loss) income                                    $(1,504,540)     $ (152,312)       $(2,252,835)       $ 90,071
Weighted average of shares outstanding                10,248,005       6,791,360         10,248,005       6,791,360
Basic net (loss) income per share                       $ (0.15)       $ (0.02)              $(0.22)        $ 0.01
Effect of dilutive options                                     -               -                  -                -
Diluted weighted average of shares outstanding        10,248,005       6,791,360         10,248,005        6,795,110
Diluted net income (loss) per share                     $ (0.15)       $ (0.02)              $(0.22)        $ 0.01
</TABLE>


As of October 31, 2006 and 2005, potential dilutive securities of 4,166,772 and
4,230,866 respectively, have not been included in the calculation of diluted net
income per share because their effects are anti-dilutive.

Note 8 - Fair Value of Financial Instruments

A summary of the total contract value of the Company's exposure to off-balance
sheet credit risk as of October 31, 2006 including financial instruments whose
contract amount represents credit risk only is as follows:
                                                           October 31, 2006

Commitments to extend credit                               $    26,285,891
Mandatory forward delivery commitments                           1,471,497

                                      F-12
<PAGE>

Commitments to extend credit are contractual agreements entered into with
customers to fund mortgage loans, which remain valid as long as there is no
violation of any condition established in the contract. These commitments
generally have fixed expiration dates or other termination clauses. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.

The Company is exposed to credit risk on its mandatory forward delivery
commitments when the Company's position in these instruments becomes positive
(i.e. "in-the-money") and the Company is a net creditor to the counter party to
the agreement. If the Company cannot deliver the agreed-upon loans into the
commitment by the expiration date, the Company is subject to a financial penalty
("pair-off fee").

Note  9 - Common Stock Issuance

On May 18, 2006, the Company agreed to sell up to 2.5 million shares at $0.70
each to Pegasus Funds, LLC, a Dallas-based investment fund, as well as to issue
a warrant to purchase up to 1.65 million shares at $0.70 each. Said warrant will
have a 3 year term, and the number of shares to which it will apply will be
pro-rated based upon the portion of the contracted for 2.5 million shares that
are sold.

Subsequently, on June 30, 2006, the Company and Pegasus amended the underlying
agreement to increase the number of shares to be sold to a maximum of 3.0
million, and to pay to Pegasus an 8% cash due diligence fee, based upon the
gross dollar amount of funds raised on the Company's behalf.

As of October 31, 2006, under the agreement with Pegasus, the Company had issued
1,748,000 shares of the 3.0 million shares contracted for, with a gross amount
of funds received by the Company of $1,223,600.

As part of the Purchase Agreement signed on October 16, 2006 relating to the
acquisition of the Residential Mortgage Lending division of Texas Capital Bank
(see Note 11 - Acquisition), the Company issued 1,708,645 shares to Texas
Capital Bank and six individuals in October, 2006. The Company has determined
that the fair market value of these shares was $1,196,052, or $0.70 per share.
The Company expects that the remaining 1,291,355 shares that are to be issued
under this Purchase Agreement will be issued into escrow against the earn-out
portions of the Agreement by the end of its current fiscal year. These shares
will be valued at the same price as the shares already issued.

Note  10 - Restatements

On March 13, 2007 , the Company filed Form 8-K relating to non-reliance on
previous financial
statements relating to the adequacy of our loan loss reserve. The restatements
changes are reflected in the loan loss expense" line item in the Statement of
Operations and in the liability section of the Balance Sheet under Loans Payable
(short and long term) as of and for the six months ended October 31, 2006
contained herein.

In review of the "subsequent event" loan loss assessment in the Company's
original second quarter filing, management determined that it had not treated
the potential for incurring losses on loans sold to investors properly. After
reviewing the history of loans identified as "problem loans" by investors in the
current fiscal year, management determined that its second quarter results
improperly omitted two indemnifications for loan losses and also failed to
provide for a reserve against loan losses or indemnifications against problem
loans already identified. Management found no indication that earlier periods
were affected by this omission.

Of the loan loss expense shown for the restated October 31, 2006 period,
$414,227 represents indemnifications the company committed to in the quarter,
$175,000 represents a reserve taken against future indemnifications or loan
losses, and $36,000 and $38,500 for the three and six months ended October 31,
2006, respectively, represents the previously reported early payoff expense.

                                      F-13
<PAGE>

The restatements are as follows:
<TABLE>
<CAPTION>

                                      Three-months ended October 31, 2006          Six-months ended October 31, 2006
                                      -----------------------------------          ---------------------------------
                                 As Reported          Restated     % Chg.    As Reported          Restated     % Chg.
                                 -----------          --------     ------    -----------          --------     ------
<S>                               <C>              <C>            <C>        <C>              <C>            <C>
Loan Loss Expense                 $   36,000       $   625,227       nm     $     38,500          $627,727       nm
Other Int. Income (Expense)          $22,938       $    22,885     .23%     $     45,874           $45,821     .12%
                                     -------           -------                   -------           -------
Net Loss                          $ (915,260)      $(1,504,540)   64.4%     $ (1,663,555)     $ (2,252,782)   35.4%
                                    =========      ============                =========      =============
Net Loss per Share                $   (0.09)       $    (0.15)    66.7%     $      (0.16)     $     (0.22)    37.5 %
</TABLE>



Balance Sheet Items at October 31, 2006    As Reported     Restated       % Chg
---------------------------------------    -----------     --------        -----
Short-term portion of  Loans Payable           $17,327         $263,726     nm
Loans Payable (Long-Term)                           $0         $162,500     nm
                                                                      -     ---
Accumulated Deficit                      $(13,595,105)     $(14,184,385)    4.3%
                                        =============      =============



As disclosed in a Form 8-K filing dated February 23, 2006, pursuant to internal
management review, our management, audit committee, and outside independent
accountant, Burr, Pilger & Mayer, LLP have concluded that our accounting for the
fair value of financial instruments pursuant to SAB 105, which we adopted at the
end of fiscal year 2004, and SFAS 133 has been incorrect.

There were two errors detected. First, there was an error in the underlying
worksheets calculating the change in value of our locked pipeline of mortgage
loan commitments to borrowers. This error resulted in a reversal of the sign of
the change in value the Locked Pipeline. Second, we did not properly account for
the derivative value of the "best efforts" loan locks we secure with secondary
market investors upon making loan commitments to borrowers.

We report the "Fair value of derivative financial instruments" as an asset or
liability on our balance sheet. The change in this amount from period to period
is included in our statement of operations.

These matters affect our annual report on Form 10-KSB for the years ended April
30, 2005 and 2004 and our quarterly reports on Form 10-QSB for the quarters
ended July 31, October 31, 2005 and 2004 and our quarterly report on Form 10-QSB
for the quarter ended January 31, 2005.

The table below presents the changes to the Statement of Operations for the
second quarter and six months for the period ended October 31, 2005 and the
changes to the balance sheet for the period ending April 30, 2005 and October
2004.
<TABLE>
<CAPTION>

                                    Second Quarter ended October 31, 2005          Six Months ended October 31, 2005
                                    -------------------------------------          ---------------------------------
                                 As Reported          Restated     % Chg.    As Reported          Restated     % Chg.
                                 -----------          --------     ------    -----------          --------     ------
<S>                                <C>               <C>         <C>             <C>              <C>        <C>
Changes in fair value
 of financial instruments          $ (38,836)        $  (4,754)   87.8%          $32,111          $42,425    32.2%
Net Loss                           $(186,394)        $(152,312)  -18.3%          $79,757          $90,071    12.9%
Earnings per Share                  $ (0.03)          $ (0.02)   0.0%            $ 0.01           $ 0.01     -22.2%
</TABLE>

Note 11 - Acquisition

On October 16, 2006, the Company entered into an agreement to acquire certain
assets of the mortgage lending division of Texas Capital Bank subject to
certainliabilities. For purposes herein, this operation is referred to as either
the "Residential Mortgage Lending" division or "RML." The effective date of the
acquisition was September 30, 2006. According to the terms of the agreement, the
Company is responsible for the net financial results of RML from October 1, 2006
until final consummation of the acquisition.

                                      F-14
<PAGE>


As filed in our 8-K, the essential terms of the agreement have the company
ultimately issuing up to 3,000,000 common shares for the acquisition of RML
1,708,645 of which were issued in October, 2006.. The balance of the shares are
subject to certain earn-out provisions. The Company has determined that the fair
market value of these shares issued was $1,196,052, or $0.70 per share. The
remaining shares will be valued at the same price when they are issued. However,
in order for the Company to obtain control of RML the Company needs to secure
regulatory approval to operate in numerous states, as well as secure shareholder
approval prior to being able to issue the full amount of shares, the outcome of
which is not guaranteed. During the period between entry into the agreement and
final transfer of control of RML, the Company is only eligible to receive the
net income or is responsible to pay to Texas Capital Bank the net loss based on
monthly results. Accordingly, the Company is not consolidating the results of
RML. Rather, it is treating the RML operating results as an unconsolidated
investment, showing the net gain or loss on a single line item("Unconsolidated
Operation Investment") in the Statement of Operations.



Note 12 - Subsequent Events

Subsequent to October 31, 2006, the following events occurred:

o    The warehouse line of $15 million with a $20 million bulge capability
     (totaling $35 million) referred to in Note 3 has been reduced to $10
     million with a $3 million bulge capability (totaling $13 million). The
     $900,000 CD that had been associated with this line matured, is reinvested
     with a different bank, and is no longer classified as restricted.

o    The Company received a new warehouse line from Texas Capital Bank for $25
     million that is priced at LIBOR plus 1.75 percentage points.

o    The Company agreed to repurchase 6 fraudulent loans totaling $350,000 in
     principal value from one of its secondary market investors. $50,000 of the
     repurchase price was paid up front, and the remainder will be paid at the
     rate of $12,500 per month for 24 months.

o    The Company raised $100,000 of subordinated debt, with an annual interest
     rate of 15%, due three years from the dates of issuance.


o The Company repaid $50,000 of its outstanding Subordinated Debt.

                                      F-15
<PAGE>



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

The following discussion and analysis should be read in conjunction with the
condensed financial statements and the notes thereto included as Item 1 of this
Report. The discussion of results and trends does not necessarily imply that
these results and trends will continue.

The Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of the Form 10-QSB contain forward-looking
information. The forward-looking information involves risks and uncertainties
that are based on current expectations, estimates, and projections about the
Company's business, management's beliefs and assumptions made by management.
Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", and variations of such words and similar expressions are intended
to identify such forward-looking information. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking information due to numerous factors, including, but not limited
to, availability of financing for operations, successful performance of internal
operations, impact of competition and other risks detailed below, as well as
those discussed elsewhere from time to time in the Company's Securities and
Exchange Commission filings and reports. In addition, general economic and
market conditions and growth rates could affect such statements.

QUARTER AND SIX MONTHS ENDED OCTOBER 31, 2005 COMPARED TO QUARTER AND SIX
MONTHS ENDED OCTOBER 31, 2004

For the recently ended quarter, year-over-year revenues increased 18%, gross
profits increased 5% and net income swung from a profit of about $32,000 to a
loss of $186,000. For the six months, revenues increased 30%, gross profits
increased 29% and net income swung from a loss of about $310,000 to a profit of
$80,000.

The following table shows the Company's wholesale and retail production trends
by fiscal quarter for the last nine fiscal quarters:
<TABLE>
<CAPTION>

                                     TABLE 1
                               ORIGINATION VOLUMES
                                  ($ millions)

Quarter Ended           10-31-05    7-31-05    4-30-05   1-31-05   10-31-04 7-31-04   4-3-04     1-31-04   10-31-03
-------------           --------    -------    -------   -------   -------- -------   ------     -------     ------
<S>                      <C>        <C>       <C>       <C>        <C>       <C>       <C>       <C>        <C>
Wholesale                $  100     $  130     $  84    $   91     $   94    $    98   $   128   $   103    $  135
Retail                       69         79        71        72         64         83       144        88       183
                         ------     ------     -----   -------     ------    -------   -------   -------    ------

Total                    $  169     $  209     $ 155    $  163    $   158    $   181   $   272   $   191    $  318
                         ======     ======     =====    ======    =======    =======   =======   =======    ======
</TABLE>

REVENUE ANALYSIS

In the second quarter, our overall Revenues increased 18%, higher than the 7%
increase in our total mortgage originations. The two principal factors why our
year-over-year revenue comparisons in the second quarter differ from our 7%
increase in the dollar value of loans are:

1.       Production Income increased by 42%. Production Income is heavily driven
         by loan unit volume, rather than loan dollar volume. We experienced a
         25% increase in our wholesale loan unit volume and a 23% increase in
         our retail loan unit volume year-over-year. This loan unit volume
         growth is largely the result of our increased expansion in the Arizona
         and Kansas markets where our average loan sizes are approximately half
         of what they have historically been in our established territories of
         the San Francisco Bay area and Southern California.

2.       We received about $184,000 less in foward commmitment payout fees in
         the recently ended quarter than in the previous year, thus limiting the
         increase in our Gain on Sale of Loans to only 1%, about a 7% reduction.

Our established markets in Northern and Southern California may be beginning to
experience the effects of higher interest rates. These effects are being
manifest in loan volumes being under pressure and average loan sizes possibly
diminishing as interest rates increases lower loans' affordability.


                                      MD-1
<PAGE>

In the first six months of our current fiscal year, Revenues increased by 30%,
higher than our 7% increase in the dollar value of our total mortgage
originations. Here are the major reasons why:

1.       Our Gain on Sale of Loans increased 35% in the first six months of the
         year, with nearly the entire gain having occurred in our first quarter.
         As explained in our last report, this was the result of a loan mix
         shift toward higher margin types of loans. Clearly, this mix shift
         effect on our year-over-year results waned substantially in the second
         quarter.

2.       The geographic mix of our loans is shifting to markets (Arizona and
         Kansas) with lower average loan sizes as we expand in these markets and
         hold ground in our established markets. Thus Production Income for the
         first half increased 24% year-over-year, largely reflecting the effects
         in the second quarter, explained above.

As we noted in our last two reports, about half way through our last fiscal
year, we set up a wholesale origination operation (Alt Funding) that operates in
parallel to our existing one. The purpose is to focus on a different market
segment than the Alt-A borrowers of our traditional focus. This market is for
borrowers with lower credit scores, but higher than what normally sees in
sub-prime mortgage lending. We consider them to be Alt-A-Minus borrowers. We
initially set this operation up on a pilot basis in our Arizona office, and are
rolling it out to our other markets.

The growth in our Alt Funding business has two effects on the types of loans we
originate. First, since they are smaller, on average, than our traditional
business, our average loan size is declining. This is shown in the MD&A Appendix
in Table 11. Second, the average credit scores of our loans are going down in
parallel.

Specifically, the percentage of our loans (by principal loan balance) where the
borrower's FICO score is 700 or above has declined from 64.8% to 49.4% over the
last year. The most significant increase occurred among borrowers with FICO
scores in the 600 to 649 range, rising from 6.1% to 16.6% in the same period of
time.

This is shown below in Table 2, a condensation of Table 15 in the MD&A Appendix.
<TABLE>
<CAPTION>

                                     TABLE 2
                                    CONDENSED
                        WHOLESALE FICO SCORE DISTRIBUTION

                  Quarter Ended         10/31/05     07/31/05    04/30/05    01/31/05     10/31/04
                  -------------         --------     --------    --------    --------     --------

<S>               <C>                    <C>          <C>         <C>         <C>          <C>
                  Above 700               49.4%        54.3%       54.6%       57.4%        64.8%
                  650-699                 30.0         31.9        27.6        35.4         28.6
                  600-649                 16.6         12.3        11.8         5.9          6.1
                  550-599                  2.6          0.2         3.0         0.4          0.2
                  Below 550                1.2          0.2         2.1         0.2          0.0
                  Not available            0.2          1.1         0.9         0.7          0.3
                                           ---         -----       -----        ----        -----
                  Total                  100.0%       100.0%      100.0%      100.0%       100.0%

</TABLE>

The large year-over-year improvements in our Gain on Sale of Loans margin are
beginning to diminish, and year-over-year comparisons may be increasingly
affected by the timing of Forward Commitment Payout Fees (Table 4) received. For
example, in the absence of Forward Commitment Payout Fees and effects of SFAS
133 on the accounting for derivatives, our wholesale Gain on Sale of Loans
margin (Table 3) has been in the 130 to 140 basis point range in the last three
quarters.

                                      MD-2

<PAGE>



<TABLE>
<CAPTION>

                                     TABLE 3
                          WHOLESALE GAIN ON SALE MARGIN
                                 (Basis Points)

Quarter Ended         10-31-05    7-31-05   4-30-05    1-31-05  10-31-04    7-31-04    4-30-04   1-31-04   10-31-03
-------------         --------    -------   -------    -------  --------    -------    -------   -------   --------


<S>                       <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
Gain on Sale              136       146        142       119        145       126        106       140        133

</TABLE>

<TABLE>
<CAPTION>
                                     TABLE 4
                     FORWARD COMMITMENT PAYOUT FEES RECEIVED
                                    ($ 000's)

Quarter Ended         10-31-05    7-31-05   4-30-05    1-31-05  10-31-04    7-31-04    4-30-04   1-31-04   10-31-03
-------------         --------    -------   -------    -------  --------    -------    -------   -------   --------

<S>                      <C>       <C>        <C>      <C>         <C>        <C>       <C>      <C>        <C>
Fees Received            $ 87      $125       $ 98     $ 105       $271       $ 0       $ 51     $ 335      $ 528
</TABLE>

GROSS PROFIT ANALYSIS

Gross profits for the quarter just ended were5% higher than what we generated in
the comparable quarter a year ago, less than the 18% increase in our revenues.
The following factors held our gross profit growth back in the quarter:

1.       Our Direct Expenses increased 37% while revenues increased 18%. This
         was driven by an increasingly competitive environment for individuals
         who can originate and process mortgage loans, forcing us to raise our
         compensation levels to recruit and retain people.

2.       Our Net Interest Income/(Expense) showed a negative comparison, one
         that slowed our gross profit growth by 4 percentage points and reduced
         our Gross Profit Margin by 2 percentage points. The largest part of
         this was due to a $47,000 swing in our subordinated debt interest
         expense, reflective of the offering we completed in January of this
         year. Secondarily, but not unimportant to the trend, was the effect of
         generally higher interest rates, combined with a longer period of time
         our mortgages remain financed before they are purchased by investors
         increasing the overall cost of our warehouse financings.

<TABLE>
<CAPTION>
                                     TABLE 5
                           GROSS PROFIT MARGIN TRENDS

Quarter Ended           10-31-05    7-31-05   4-30-05   1-31-05*  10-31-04*   7-31-04*   4-30-04*  1-31-04*   10-31-03*
-------------           --------    -------   -------   -------   --------    -------    -------   -------    --------

<S>                        <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
Gross Profit Margin        59.4%     60.8%      56.5%     61.7%      65.2%     61.0%      50.2%     59.8%      52.0%
</TABLE>


         * - These margins are different than previously reported because we are
         now reporting Subordinated Debt Interest and SFAS 133-related effects
         (income or expense) above the Gross Profit line going forward from
         January 31, 2005.

INDIRECT EXPENSE ANALYSIS

Our Indirect Expenses increased 21% on a year-over-year basis during the
recently ended quarter. We have been suggesting since the Fall of last year that
we believed we had reached a bottom in how low we could take our Indirect
Expenses. As the table below clearly shows, this has been the case.

The sole driver of our increasing Indirect Expenses in the last year has been
the Salaries and Benefits paid to non-production personnel. These have increased
for two reasons:

                                      MD-3
<PAGE>

First, we have been expanding our operations in Arizona throughout this period
of time and we opened an office in Overland Park, Kansas at the beginning of the
recently ended quarter. This requires us to pay for support staff and guaranteed
salary draws for production personnel in advance of seeing mortgage loan
production and funding.

Second, we are starting to experience inflationary pressures on compensation
generally.
<TABLE>
<CAPTION>
                                     TABLE 6
                         INDIRECT EXPENSE AND COMPONENTS
                                    ($ 000s)

Quarter Ended           10-31-05    7-31-05    4-30-05   1-31-05  10-31-04   7-31-04  4-30-04     1-31-04    10-31-03
-------------           --------    -------    -------   -------  ---------------------------     -------    --------


<S>                     <C>        <C>         <C>        <C>       <C>        <C>     <C>        <C>        <C>
Total Indirect Exp.     $1,936     $1,898      $1,823     $1,660    $1,638     $1,702  $1,771     $1,699     $1,799
    Percent of Rev.      65.2%      55.6%        67.1%    75.6%      65.5%      68.3%   50.5%      57.5%      40.6%

Selected Components:

    Salaries and Ben.   $1,222     $1,119      $1,086      $948        $895     $950   $1,012     $1,024     $1,096
    Percent of Rev.      41.2%      32.8%        40.0%     43.2%      35.8%     38.2%   28.8%      34.7%      24.7%

    Gen. and Admin.      $521       $586        $515       $520       $551      $559     $559       $480       $503
    Percent of Rev.      17.5%      17.2%        18.9%     23.7%     22.0%      22.5%   15.9%      16.3%      11.4%
</TABLE>

OTHER COMMENTARY

During the quarter just ended and in preparation for a change in our accounting
system which we implemented November 1, 2005, we subjected our balance sheet to
another round of detailed scrutiny beyond that which was done at our last
year-end. We found a total of about $61,000 of various Accrued Payables and
other liabilities (which had been previously expensed) that we determined are
not subject to future payment. Approximately $25,000 of these other liabilities
related to periods substantially prior to the end of our last fiscal year, and
about $35,000 of these accrued liabilities related to the first quarter of this
fiscal year.

There is not a single line item on our Income Statement (Condensed Statement of
Operations) where these accruals were reversed out. They show up in various
revenue and expense line items, no one of which changes that line item
materially, either in the current financial statements or in the periods when
these accruals had been made.

The net result is that our operating loss of for the quarter, in the absence of
these accrual reversals, would have been $213,644 instead of the the $152,312
loss actually shown.

LIQUIDITY AND CAPITAL RESOURCES

Our unrestricted and restricted cash position as of October 31, 2005, increased
by $183,742 from what it was at the end of our last fiscal quarter, July 31,
2005. Management and the Company's board of directors believe this is a more
appropriate figure to examine than unrestricted cash alone. The restricted cash
is cash held on deposit with the Company's warehouse lenders and represent a
management decision and strategy. We can negotiate for lower deposit
requirements, but at the expense of other variables associated with the lending
facility, including, but not limited to, nominal interest rate, per transaction
fees, and loan haircuts. Hence, the total of unrestricted and restricted cash
plus short-term (cash-like) investments is what we measure in evaluating our
overall liquidity.

The principal changes to our aggregate cash and investments positions during the
year are shown in Table 7, "Simplified Sources/(Uses) of Cash," below. The
statements of cash flows is included with the other financial statements in Item
1 of this filing. The sum of the cash flow from operations in Table 7 below is
$5,000 higher than that shown in the statements of cash flows because Table 7
includes changes in all forms of cash, including restricted, while the
statements of cash flows only addresses unrestricted forms of cash. The
short-form table below is how management and the Company's board of directors
monitor the Company's changes in cash and investments position.

                                      MD-4

<PAGE>

<TABLE>
<CAPTION>



                                     TABLE 7
                        SIMPLIFIED SOURCES/(USES) OF CASH

                                                                                          Change from Prior Period End
                                                                                   Quarter           Quarter          Quarter
         Sources (Uses)                                                           10-31-05           7-31-05          4-30-05
         --------------------------------------------------------------------------------------------------------------------

<S>                                                                          <C>               <C>              <C>
          Operating Cash Flows
          Income Statement Related Cash Flows
          Net Income/(Loss)                                                  $  (152,312)      $   242,383      $(3,256,815)
          Add back non-cash charges/(income)
          Depreciation & Amortization                                             17,960            18,156           21,054
          Accrued liability write-down                                           (61,332)
          Impairment of goodwill                                                       0                 0        2,714,516
          Fair value of financial derivatives changes                              4,754           (47,179)          69,540
          Stock option expense                                                         0                 0          136,762
          Deferred income taxes                                                        0                 0          291,365
          Provision for early payoff penalties, net of payments                        0            15,000           14,000
                                                                                                                           -
          Actual early payoff penalties paid                                     (20,475)           (1,849)          (5,333)
                                                                                 --------           -------           ------
          Operational Cash Flows from the Income Statement                    $ (211,405)         $226,511         $(14,911)

          Balance Sheet Related Cash Flows
          Mortgages held for sale                                              $ 574,032         $ 257,288       $ (229,706)
          Short-term mortgage receivables                                       (133,495)          (88,135)         (71,292)
          Other Assets                                                            16,108           (19,258)          26,479
          Accounts payable and other accrued liabilities                         (30,548)            8,945          121,958
                                                                                 --------            -----          -------
          Operational Cash Flow from the Balance Sheet                       $   426,097         $ 158,840       $ (152,561)

          Total Cash Flow Generated/(Used) in Operations                        $214,692         $ 385,351       $ (167,472)

          Financing Activity Cash Flows
          Issuance of subordinated debt                                              $ 0               $ 0              $ 0
          Repayments of subordinated debt                                              0                 0         (250,000)
          Stock purchases                                                              0                 0                0
          Settlement paid                                                              0                 0                0
          Capital lease obligations change                                             0                 0           (3,252)
                                                                                       -                 -           ------

          Total Cash Flow from Financings Activities                                 $ 0               $ 0       $ (253,252)

          Investing Activity Cash Flows
          Purchase of property and equipment                                   $ (30,950)        $ (18,156)        $ (3,560)

          Total Cash Flow from Investing Activities                            $ (30,950)        $ (18,156)        $ (3,560)

          Net Change to Aggregate Cash                                         $ 183,742         $ 367,195       $ (424,284)

</TABLE>


In summary form, this table says the following regarding the changes in the
Company's aggregate cash resources in the recently ended quarter.

1.       The Company lost about $211,000 in cash flow from income statement-
         related operations during the recently ended quarter.

                                      MD-4
<PAGE>


2.       The Company decreased the total of Mortgage Loans Held for Sale
         and Short-Term Mortgage-Related Receivables by about $440,000.
         This merely reflects timing differences in when pools of mortgages
         are sold and not some underlying change in policy, practice or
         strategy.

3.       The Company spent about $30,950 on purchases of property and equipment
         during the quarter just ended.

4.       The paying down of Accounts Payable and other Accrued Liabilities in
         the quarter resulted in the use of about $31,000 of cash.

SUMMARY OF FINANCING FACILITIES

The capital resources utilized by the Company to fund its mortgage lending
activities are primarily provided by warehouse lenders that fund the mortgage
loans through Master Sales Agreements ("warehouse facilities"). The size of the
Company's warehouse facilities is based on the Company's net worth and cash
resources. As of October 31, 2005, the Company had a total of two financing
facilities for a maximum financing capacity of up to $75 million.

The funding facilities have various financial and operational covenants with
which the Company must comply, including the requirement that the Company
maintain cash deposits with certain lenders as compensating balances.
Collectively, these facilities currently require compensating balances of $1.025
million.

More detailed data on these facilities is presented in Note 3 to the Financial
Statements presented in Item 1.

Our overall funding strategy is to use committed facilities, summarized as of
October 31, 2005:


<TABLE>
<CAPTION>

                                     TABLE 8
                          LOAN FACILITIES AND BALANCES

                             Committed        Outstanding     Required        Interest Rate
Type of Facility             Facility           Balance     Cash Deposit    October 31, 2005     Maturity
----------------           -------------    --------------  ------------    ----------------     --------

<S>                            <C>          <C>             <C>              <C>                 <C>
Master sales agreement         $35,000,000  $    7,792,600  $   1,000,000     6.75%(1)           Annual or 30 days notice
Master sales agreement          40,000,000      19,885,324         25,000    6.08-6.58%(2)       Annual or 30 days notice
                                ----------  --------------    -----------
Totals                         $75,000,000   $  27,677,924   $  1,025,000
                               ===========   =============     ==========
</TABLE>


(1)  For the first $15 million of this facility, the contractual interest rate
     facility was 3.99% or Prime, whichever is greater. The rate for the next
     $20 million is 0.05% greater than the rate for the first $15 million.

(2)  The contractual interest rate on this facility is one month LIBOR plus a
     margin ranging from 1.875% to 2.50%.


FUTURE NON-OPERATIONAL CASH REQUIREMENTS

The Company has certain non-operational requirements for cash in the future. The
material requirements are those for repayment of the subordinated debt issued in
recent years to bolster our capital position. The schedule of maturities for
these is as follows:

                                     TABLE 9
                   NON-OPERATIONAL CASH REPAYMENT REQUIREMENTS

                            October 31, 2006                    $   50,000
                            March 31, 2007                      $  800,000
                            May 31, 2007                        $  200,000
                            January 12, 2015                    $2,687,700

                                      MD-5
<PAGE>

OFF BALANCE SHEET RISKS

The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit in the form of
loans, and mandatory forward delivery commitments. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the balance sheet. The mandatory forward delivery
commitments also involve the risk of nonperformance on the part of the Company.
The Company manages these risks by entering into these agreements with major,
well-known financial institutions. The contract amounts of those instruments
reflect the extent of involvement the Company has in particular classes of
financial instruments.

The notional value of financial instruments, whose contract amounts represent
credit and risk at the indicated dates, are as follows:

                                    TABLE 10
                     NOTIONAL VALUE OF FINANCIAL INSTRUMENTS

                                            October 31,               April 30,
                                               2005                     2005
                                            -----------------------------------

Commitments to extend credit                $ 27,874,715           $ 21,772,820
Mandatory forward delivery commitments         3,471,550              2,741,500


                                      MD-6


<PAGE>




ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
(a)      EXHIBITS

31.1     Certification  of the Chief  Executive  Officer  pursuant to 18 U.S.C.
         Section 1350 as adopted  pursuant to Section 302 of the Sarbanes-Oxley
         Act of 2002
32.1     Certification of the Chief Executive 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

                  NONE

                                      O-1
<PAGE>


                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                           Transnational Financial Network, Inc


Date: May 4, 2007                           /s/ Joseph Kristul
      -----------                           -----------------------------------
                                            Joseph Kristul, Chief Executive
                                            and Chief Financial Officer