##### 



U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the fiscal year ended December 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No.: 0-22936
 Crown NorthCorp, Inc.
  Delaware
    
    22-3172740(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)P.O. Box 613, Cheyenne, Wyoming
    
    82001(Address of principal executive offices)
    
    (Zip Code)
 
 
 
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TABLE OF CONTENTS
 PagePART I.
    
    
    
    
    1Item 1.
    
    Description of Business
    
    
    1Item 2.
    
    Description of Property
    
    
    3Item 3.
    
    Legal Proceedings
    
    
    3Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    4PART II.
    
    
    
    
    4Item 5.
    
    Market for Common Equity and Related Stockholder Matters
    
    
    4Item 6.
    
    Managements Discussion and Analysis
    
    
    5Item 7.
    
    Financial Statements
    
    F-1 through F-42Item 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    13Item 8A.
    
    Controls and Procedures
    
    
    13Item 8B.
    
    Other Information
    
    
    13PART III.
    
    
    
    
    14Item 9.
    
    Directors and Executive Officers Promoters, Control Persons and Corporate Governance; Compliance with Section 16(e) of the Exchange Act
    
    
    14Item 10.
    
    Executive Compensation
    
    
    17Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    18Item 12.
    
    Certain Relationships and Related Transactions
    
    
    20Item 13.
    
    Exhibits
    
    
    21Item 14.
    
    Principal Accountant Fees and Services
    
    
    22




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##### 



Item 1.  Description of Business
 Business Overview
    Third-Party Asset Management
  1




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##### 



Loan Servicing and Mortgage Management
   Loan Origination
 Asset Management
 Competitive Environment
  2




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##### 



Item 2.  Description of Property
 Offices
  Investment Policies
  
 Item 3.  Legal Proceedings
  3




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##### 



Item 4.  Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5.  Market for Common Equity and Related Stockholder Matters
 Common Stock
       4




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##### 



Description
    
    Reconciliation
    
    TotalTotal shares outstanding as of December
31, 2003. (1)
    
    
    
    
    
    
    28,614,848
    (2)Effect of Stock Splits
    
    
    
    
    
    
    2,861,485Issuance of 12 million shares as merger
consideration
    
    
    12,000,000
    
    
    
    14,861,485Conversion of Preferred Stock Series II
    
    
    400,000
    (3)
    
    
    15,261,485Treasury Stock (4)
    
    
    (1,214,202
    )
    
    
    14,047,283Issuance of shares as director
compensation since 12/31/03.
    
    
    134,250
    
    
    
    14,181,533Total:
    
    
    14,181,533
 
 (1)
    
    Including conversion of all Preferred Stock (except for Series II Preferred Stock), and
immediately prior to all Stock Splits(2)
    
    Amount consists of 11,937,851 shares per Stockholder Record, plus 15,356,997 shares for
conversion of Preferred Stock (other than Series II Preferred), plus 1,320,000 shares for director
compensation through December 31, 2003.(3)
    
    The Series II Preferred is convertible into 4,000,000 shares of Common Stock, which (on a
post-stock splits basis) equates to 400,000 shares of Common Stock.(4)
    
    Royal holds 746,017 shares of Common Stock following the Stock Splits (plus the 400,000 shares
issuable on conversion of the Series II Preferred. Pursuant to the terms of the merger with Royal,
all 1,146,017 shares held by Royal are to be converted into treasury stock of the Company,
resulting in a total of 1,214,202 treasury shares (i.e., including the 68,185 shares already held
by Crown). Pursuant to Delaware law, treasury stock of the Company is not treated as outstanding
for voting purposes, and may be re-issued and re-sold. 
 Item 6.  Managements Discussion and Analysis
 The Companys Businesses
  5




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##### 



6




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##### 



Forward Looking Statements
   o
    
    The company has completed the majority of the
reorganization of a substantial portion of its
operations as a result of the Westfalenbank AG
acquisition. The intent of this reorganization is
for Crown to operate is loan servicing, mortgage
management and loan origination activities through
the bank. Completion of these reorganization
activities has been ongoing and it is anticipated
that completion will occur during the second half of
2007. There can be no assurances at this time as to
the
timing or the results of this reorganization or its affect on the operating
performance of the company.o
    
    Management believes that the Westfalenbank AG
acquisition will be a catalyst to further growth in
the asset management and servicing businesses,
primarily in Europe and that resultant increases in
recurring revenue will help the company achieve
operating profitability. However, there can be no
assurance of these results.o
    
    Crowns liquidity and capital resources remain very
limited when compared to virtually all of its
competitors. While the company believes that the
acquisition of Westfalenbank AG will significantly
improve its competitive position and expand its
resources available to realize upon new business
opportunities, there can be no assurance of any
particular results.o
    
    Crown and certain of its subsidiaries operate as
rated servicers. If these entities were to no longer
be rated, or if those ratings were lowered, there
would be an adverse effect on the companys
operations. Crowns business volumes and financial
condition may affect its servicer ratings.
 Outlook
  7




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##### 



Results of Operations for the Year Ended December 31, 2006 Compared to the Year Ended December 31,
2005.
  8




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##### 



9




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##### 



2006
    
    2005
    
    $ ChangePersonnel
    
    $
    9,997,576
    
    
    $
    5,823,021
    
    
    $
    4,174,555Legal, accounting and professional
    
    $
    2,336,393
    
    
    $
    1,752,928
    
    
    $
    583,465Insurance and other administrative expenses
    
    $
    5,515,518
    
    
    $
    1,362,716
    
    
    $
    4,152,802Occupancy
    
    $
    3,262,870
    
    
    $
    1,821,751
    
    
    $
    1,441,119Write off servicing rights
    
    $
    178,661
    
    
    $
    1,906,918
    
    
    $
    (1,728,257
    )Interest
    
    $
    1,679,466
    
    
    $
    111
    
    
    $
    1,679,355Amortization and depreciation
    
    $
    1,063,447
    
    
    $
    713,045
    
    
    $
    350,402Total
    
    $
    24,033,933
    
    
    $
    13,380,490
    
    
    $
    10,653,441
      10




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##### 



Liquidity and Capital Resources
   Historical Cash Flows
    11




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##### 



Item 7.  Financial Statements
 INDEX TO FINANCIAL STATEMENTS
 PageIndependent Auditors Report
    
    F-1Consolidated Balance Sheets, December 31, 2006 and 2005
    
    F-2Consolidated Statements of Operations for the years ended
December 31, 2006 and 2005
    
    F-3Consolidated Statements of Shareholders Equity for the years
ended December 31, 2006 and 2005
    
    F-4Consolidated Statements of Cash Flows for the years ended
December 31, 2006 and 2005
    
    F-5Notes to Consolidated Financial Statements for the years
ended December 31, 2006 and 2005
    
    F-6
 12




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##### 



INDEPENDENT AUDITORS REPORT
 
    
 
 /
 F-1




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##### 



CROWN NORTHCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS  DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    57,586,963
    
    
    $
    2,474,005Accounts receivableServicing fee receivables
    
    
    7,692,538
    
    
    
    3,110,438Receivable from subsidiaries in liquidation (see note 3)
    
    
    3,079,686
    
    
    
    Miscellaneous receivables
    
    
    3,000,911
    
    
    
    Total accounts receivable
    
    
    13,773,135
    
    
    
    3,110,438Prepaid expenses and other assets
    
    
    293,467
    
    
    
    187,966Total current assets
    
    
    71 ,653,565
    
    
    
    5,772,409PROPERTY AND EQUIPMENT  net
    
    
    2,361,694
    
    
    
    455,769RESTRICTED CASH
    
    
    1,758,274
    
    
    
    368,477INTANGIBLE ASSETSBank License (see note 2)
    
    
    3,960,390
    
    
    
    OTHER ASSETSInvestment in partnerships and joint ventures
    
    
    542,475
    
    
    
    545,282Mortgage loans, net of reserves (see note 6)
    
    
    6,803,584
    
    
    
    647,607Loan servicing rights net (see note 16)
    
    
    4,508,701
    
    
    
    4,830,765Capitalized software cost  net
    
    
    716,391
    
    
    
    416,975Capitalized financing costs  net (see note 8)
    
    
    3,320,607
    
    
    
    Tax claims receivable
    
    
    1,107,804
    
    
    
    Deferred tax asset
    
    
    304,658
    
    
    
    Other assets
    
    
    219,078
    
    
    
    38,895Trust fund assets (see note 7)
    
    
    12,963,417
    
    
    
    Total other assets
    
    
    30,486,715
    
    
    
    6,479,524TOTAL
    
    $
    110,220,638
    
    
    $
    13,076,179
 F-2




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##### 



CROWN NORTHCORP, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    8,446,241
    
    
    $
    682,882Foreign interest bearing deposits
    
    
    874,331
    
    
    
    Accrued expenses:Bonuses
    
    
    668,758
    
    
    
    Interest
    
    
    1,217,327
    
    
    
    Other
    
    
    1 ,096,526
    
    
    
    1,121,259Total accrued expenses
    
    
    2,982,611
    
    
    
    1,121,259Current portion of long term debt (see note 8)
    
    
    20,201,950
    
    
    
    Tax payable
    
    
    1,419,052
    
    
    
    Other current liabilities
    
    
    225,680
    
    
    
    Total current liabilities
    
    
    34,149,865
    
    
    
    1,804,141LONG-TERM OBLIGATIONS:Long term debt (see note 8)
    
    
    39,424,628
    
    
    
    Subordinated debt (see note 9)
    
    
    2,640,260
    
    
    
    Provision for credit business
    
    
    2,435,550
    
    
    
    Deferred data storage expense
    
    
    1,128,149
    
    
    
    Pension provision (see note 14)
    
    
    1,176,790
    
    
    
    Restructuring provision
    
    
    1,178,864
    
    
    
    Other long term liabilities
    
    
    2,185,788
    
    
    
    Allowance for loan losses
    
    
    243,076
    
    
    
    243,076Trust fund liabilities (see note 7)
    
    
    12,963,417
    
    
    
    Total long-term obligations
    
    
    63,376,522
    
    
    
    243,076SHAREHOLDERS EQUITY:Common stock
    
    
    299,573
    
    
    
    296,223Additional paid-in capital
    
    
    21,947,176
    
    
    
    20,015,450Accumulated comprehensive income
    
    
    197,516
    
    
    
    56,815Accumulated deficit
    
    
    (9,572,956
    )
    
    
    (9,162,468
    )Treasury stock, at cost
    
    
    (177,058
    )
    
    
    (177,058
    )Total shareholders equity
    
    
    12,694,251
    
    
    
    11,028,962TOTAL
    
    $
    110,220,638
    
    
    $
    13,076,179
  F-3




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##### 



CROWN NORTHCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME  FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005REVENUES:Management fees
    
    $
    10,130,430
    
    
    $
    2,654,760Loan servicing fees, net
    
    
    6,530,021
    
    
    
    4,513,771Disposition fees
    
    
    4,200,948
    
    
    
    3,439,389Interest income
    
    
    1,205,080
    
    
    
    131,862Reversal of loan loss provision
    
    
    2,007,181
    
    
    
    Income from partnerships and joint ventures
    
    
    
    
    
    
    (114,462
    )Gain on short term note disposition
    
    
    
    
    
    
    417,276Other
    
    
    149,331
    
    
    
    173,667Total revenues
    
    
    24,222,991
    
    
    
    11,216,263OPERATING AND ADMINISTRATIVE EXPENSES:Personnel
    
    
    9,997,576
    
    
    
    5,823,021Legal, accounting and professional fees
    
    
    2,336,393
    
    
    
    1,752,928Insurance and other administrative expenses
    
    
    5,514,646
    
    
    
    1,362,716Occupancy
    
    
    3,262,870
    
    
    
    1,821,751Write off mortgage servicing rights
    
    
    178,661
    
    
    
    1,906,918Depreciation and amortization
    
    
    1,063,435
    
    
    
    713,045Total operating and administrative expenses
    
    
    22,353,581
    
    
    
    13,380,379INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INTEREST EXPENSE
    
    
    1,869,410
    
    
    
    (2,164,116
    )INTEREST EXPENSE
    
    
    1,679,466
    
    
    
    111NET INCOME (LOSS) BEFORE TAX
    
    
    189,944
    
    
    
    (2,164,227
    )INCOME TAX
EXPENSE (BENEFIT)
    
    
    600,430
    
    
    
    NET INCOME (LOSS)
    
    
    (410,486
    )
    
    
    (2,164,227
    )OTHER COMPREHENSIVE INCOMEForeign currency translation adjustment, net of tax effect
    
    
    329,347
    
    
    
    (479,425
    )COMPREHENSIVE INCOME (LOSS)
    
    $
    (81,139
    )
    
    $
    (2,643,652
    )EARNINGS (LOSS) PER
SHARE
    
    $
    (0.01
    )
    
    $
    (0.08
    )WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    29,069,152
    
    
    
    28,681,316
  F-4




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##### 



CROWN NORTHCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (410,486
    )
    
    $
    (2,164,227
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    1,473,430
    
    
    
    701,347Equity in income from investment in partnerships and joint ventures
    
    
    (44,835
    )
    
    
    74,927Write off unamortized cost of disposed asset
    
    
    178,661
    
    
    
    Interest capitalization
    
    
    502,795Provision to impairment to mortgage servicing rights
    
    
    
    
    
    
    1,906,918Payment of board of directors fees by the issuance of common stock
    
    
    33,500
    
    
    
    34,749Deferred tax asset
    
    
    203,080Change in operating assets and liabilities: net of effects from purchase of subsidiaryAccounts receivable
    
    
    8,346,176
    
    
    
    (951,865
    )Prepaid expenses and other assets
    
    
    14,897,449
    
    
    
    (35,287
    )Accounts payable and accrued expenses
    
    
    (24,007,603
    )
    
    
    118,395Net cash provided by (used in) operating activities
    
    
    1,172,167
    
    
    
    (315,043
    )CASH FLOWS FROM INVESTING ACTIVITIES:Cash acquired in acquisition
    
    
    24,673,762
    
    
    
    Purchase of property and equipment
    
    
    (518,553
    )
    
    
    (276,241
    )Decrease (increase) in other investments
    
    
    (921,917
    )
    
    
    (134,170
    )Decrease (increase) in restricted cash
    
    
    (1,376,860
    )
    
    
    (7,097
    )Deposits
    
    
    
    
    
    
    (46
    )Net cash provided by (used in) investing activities
    
    
    21,856,432
    
    
    
    (417,554
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from notes payable
    
    
    33,403,250
    
    
    
    Loan fees
    
    
    (1,077,549
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    32,325,701
    
    
    
    NET INCREASE (DECREASE) IN CASH DURING THE PERIOD
    
    
    55,354,300
    
    
    
    (732,597
    )EFFECT OF EXCHANGE RATE ON CASH
    
    
    (241,342
    )
    
    
    (80,501
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    2,474,005
    
    
    
    3,287,103CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    57,586,963
    
    
    $
    2,474,005SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest
    
    $
    94,820
    
    
    $
    Cash paid for taxes
    
    $
    5,199See notes to consolidated financial statements.INVESTING AND FINANCING ACTIVITIESCORPORATE ACQUISITIONReceivables from Customers
    
    $
    22,794,734Investments in Associates
    
    
    17,221Trust Assets
    
    
    14,295,795Intangible Asset  Bank License
    
    
    3,960,390Intangible Asset  Software
    
    
    563,408Fixed Assets
    
    
    2,067,353Other Assets
    
    
    17,053,534Prepaid Expenese
    
    
    710,167Fair Value of Assets acquired
    
    
    61,462,601Due to banks
    
    
    (4,779,434
    )Liabilities to customers (LT NOTES)
    
    
    (25,082,470
    )Liabilities to Customers (OTHER)
    
    
    (12,981,835
    )Trust Liabilities
    
    
    (14,295,795
    )Other liabilities (Accounts payable)
    
    
    (18,397,423
    )Accrued expenses
    
    
    (2,585
    )Other Provisions
    
    
    (7,108,022
    )Provisons for Pensions
    
    
    (719,786
    )Deferred Tax Liabilty
    
    
    (128,752
    )Subordinated Debt
    
    
    (2,640,260
    )Liabilities assumed
    
    
    (86,136,362
    )Cash acquired in acquistion, net of cash paid
    
    $
    (24,673,762
    )
 F-5




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##### 



CROWN NORTHCORP, INC. AND SUBSIDIARIES
 
   Convertible Preferred StockCommon Stock
    
    
    
    
    
    
    Series CC
    
    
    Series DD
    
    
    Series EE
    
    
    Series FF
    
    
    Series GG
    
    
    Series HH
    
    
    Series II
    
    
    Additional
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    
    
    
    
    TotalShares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    
    
    Shares
    
    
    
    
    Shares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Treasury Stock
    
    
    Shareholders'Issued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Issued
    
    Amount
    
    Issued
    
    Amount
    
    Issued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    EquityBALANCE, DECEMBER 31, 2002
    
    
    12,742,851
    
    
    
    127,428
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    8,791,832
    
    
    
    (7,862,162
    )
    
    
    113,306
    
    
    
    (682,073
    )
    
    
    (67,053
    )
    
    
    1,103,351Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (213,129
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (213,129
    )Conversion of convertible preferred
    
    
    15,356,997
    
    
    
    153,570
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,086,593
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110,005
    )
    
    
    11,130,158Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    926
    
    
    
    
    
    
    
    
    
    
    
    926Issuance of common stock
    
    
    515,000
    
    
    
    5,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,500BALANCE, DECEMBER 31, 2003
    
    
    28,614,848
    
    
    
    286,148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,924,775
    
    
    
    (8,075,291
    )
    
    
    114,232
    
    
    
    (682,073
    )
    
    
    (177,058
    )
    
    
    12,072,806Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    975,372
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    975,372Reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,231
    
    
    
    (114,231
    )
    
    
    
    
    
    
    
    
    
    
    Audit adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,553
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,553
    )Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    536,241
    
    
    
    
    
    
    
    
    
    
    
    536,241Issuance of common stock
    
    
    660,000
    
    
    
    6,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,000BALANCE, DECEMBER 31, 2004
    
    
    29,274,848
    
    
    
    292,748
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,984,175
    
    
    
    (6,998,241
    )
    
    
    536,242
    
    
    
    (682,073
    )
    
    
    (177,058
    )
    
    
    13,637,866Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,164,229
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,164,229
    )Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (479,427
    )
    
    
    
    
    
    
    
    
    
    
    (479,427
    )Issuance of common stock
    
    
    347,500
    
    
    
    3,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,750BALANCE, DECEMBER 31, 2005
    
    
    29,622,348
    
    
    
    296,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    20,015,450
    
    
    
    (9,162,470
    )
    
    
    56,815
    
    
    
    (682,073
    )
    
    
    (177,058
    )
    
    
    11,028,960Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (410,486
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (410,486
    )Accrued pension cost per FASB 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (188,646
    )
    
    
    
    
    
    
    
    
    
    
    (188,646
    )Warrants issued in connection with facility agreement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,901,576
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,901,576Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329,347
    
    
    
    
    
    
    
    
    
    
    
    329,347Issuance of common stock
    
    
    335,000
    
    
    
    3,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,500BALANCE, DECEMBER 31, 2006
    
    
    29,957,348
    
    
    
    299,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    21,947,176
    
    
    
    (9,572,956
    )
    
    
    197,516
    
    
    
    (682,073
    )
    
    
    (177,058
    )
    
    
    12,694,251
  F-6




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
  Business Description
  Cash and Cash Equivalents
  Accounts Receivable
  F-7




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
 Property and Equipment
   Computer hardware
    
    3 yearsVehicles
    
    6 yearsOffice furniture and equipment
    
    3 to 13 years
  Banking License
  Capitalized Software Costs
  F-8




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
 Long- Lived Assets
  Loan Servicing Rights
   Capitalized Financing Costs
  Tax Claims Receivables
  F-9




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
 Investments in Non-Performing Loans and Reserves for Loan Losses
  Investments in Partnerships and Joint Ventures
  Subordinated Liabilities
  Provision for Credit Business
  F-10




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
 Deferred Data Storage Expense
  Pension Provisions
  Other Provisions
  Allowance for Loan Losses
  Income Taxes
  F-11




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
 Loan Servicing Fees
  Management Fees
  Disposition Fees
  Incentive Fees
  Leases
  F-12




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
 Foreign Currency Translation
  Estimates
  Credit Risk
  2006
    
    
    2005United States
    
    $
    288,979
    
    
    $
    2,240,529United Kingdom
    
    
    2,947,082
    
    
    
    601,953Germany
    
    
    55,647,994
    
    
    
    Netherlands
    
    
    31,743
    
    
    
    Sweden
    
    
    429,438
    
    
    
    Total cash and restricted cash
    
    $
    59,345,236
    
    
    $
    2,842,482
  F-13




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
 Recently Issued Accounting Standards
    F-14




---



##### 



BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
   Reclassifications
  ACQUISTION OF WESTFALENBANK AG
  
 F-15




---



##### 



ACQUISTION OF WESTFALEN BANK AG
 
  
 Purchase Price Allocation
 
 Current assets
    
    
    62,747,677Property and equipment
    
    
    1,566,022Software
    
    
    426,782Banking license
    
    
    3,000,000Non-performing loan portfolio
    
    
    12,174,520Loan costs
    
    
    501,266Other long term assets
    
    
    1,604,312Current liabilities
    
    
    (27,392,209
    )Long term debt
    
    
    (19,000,000
    )Subordinated debt
    
    
    (2,000,000
    )Other long term liabilities
    
    
    (6,027,104
    )Total purchase price
    
    
    27,601,266
 F-16




---



##### 



ACQUISTION OF WESTFALEN BANK AG
 Proforma Financial Information
   RECEIVABLE FROM SUBSIDIARIES IN LIQUIDATION
   BAK Verwaltungsgesellschaft mbH, Bochum, Huestr. 21-25 
 F-17




---



##### 



RECEIVABLE FROM SUBSIDIARIES IN LIQUIDATION
 Gesellschaft für Grundbesitz mbH, Bochum, Huestr. 21-25 
 Westfalen Kapitalverwaltungsgesellschaft mbH, Bochum, Huestr. 21-25 
 Westfalen Corporate Finance mbH, Bochum, Huestr. 21-25 
 
 PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE COSTS
  2006
    
    
    2005Land and buildings
    
    $
    546,256
    
    
    $
    Office equipment and fixtures
    
    
    1,613,954
    
    
    
    333,485Computer equipment
    
    
    1,871,775
    
    
    
    1,259,681Vehicles
    
    
    6,692
    
    
    
    Property and equipment  total
    
    
    4,038,677
    
    
    
    1,593,166Less accumulated depreciation
    
    
    (1,676,983
    )
    
    
    (1,137,397
    )Property and equipment  net
    
    $
    2,361,694
    
    
    $
    455,769
  F-18




---



##### 



PROPERTY AND EQUIPMENT AND CAPITALIZED SOFTWARE COSTS
   2006
    
    
    2005Capitalized software
    
    $
    2,470,043
    
    
    $
    1,538,011Less accumulated amortization
    
    
    (1,753,652
    )
    
    
    (1,121,036
    )Capitalized software  net
    
    $
    716,391
    
    
    $
    416,975
  INVESTMENTS IN AFFILIATES AND JOINT VENTURES
  Titrisation Belge-Belgische Effectisering SA/NV
  F-19




---



##### 



INVESTMENTS IN AFFILIATES AND JOINT VENTURES
  Balance sheet at December 31,
    
    2006
    
    
    2005Assets:Current assets
    
    $
    859,690
    
    
    $
    634,371Fixed assets
    
    
    153,144
    
    
    
    177,610Liabilities:Current liabilities
    
    
    249,548
    
    
    
    94,975Income statement:Revenue
    
    
    759,012
    
    
    
    737,304Expense
    
    
    793,779
    
    
    
    668,489Net income (loss) before tax
    
    
    (34,797
    )
    
    
    68,814Tax
    
    
    
    
    
    
    23,290Net income (loss)
    
    $
    (34,797
    )
    
    $
    45,524
 Other Investments
 
 F-20




---



##### 



NON-PERFORMING LOAN PORTFOLIOS
 2006Face Value
    
    
    Reserves
    
    
    Carrying ValueGermany
    
    $
    117,811,926
    
    
    $
    (111,715,642
    )
    
    $
    6,096,284United Kingdom
    
    
    2,293,359
    
    
    
    (1,586,059
    )
    
    
    707,300Total
    
    $
    120,105,285
    
    
    $
    (113,301,701
    )
    
    $
    6,803,584
 2005Face Value
    
    
    Reserves
    
    
    Carrying ValueUnited Kingdom
    
    $
    2,119,706
    
    
    $
    (1,472,099
    )
    
    $
    647,607
  TRUST ASSETS AND LIABILITIES
  F-21




---



##### 



LONG TERM DEBT
  25 million
Facility Agreement, issued in
connection with the
acquisition discussed in Note
2. Interest payable
quarterly at a variable rate
of 12% plus EURIBOR (3.8015%
at December 31, 2006).
Principal of 15
million due March 31, 2007
with the balance due December
31, 2008. Also, the Company
may elect to capitalize 8% of
the accrued interest and
accrued letter of credit fee
due. At December 31, 2006,
864,201 has been
capitalized and included in
the amount due. See Note 20
for subsequent event.
    
    $
    34,144,108$400,000 Convertible
Promissory note from a
director, issued September
11, 2006 with interest
payable at a rate of 16%.
Balance is due March 31,
2007. The lender at their
option may elect to convert
the entire unpaid balance to
Common Stock par value of
$0.01 per share. The
conversion will be calculated
based upon the unpaid balance
times the net book value at
maturity date times 80%
    
    
    400,000The following notes were assumed in the acquisition of the Bank, as described in Note 2:5,000,000 Promissory
note, issued June 9, 2006
with interest payable
annually at a rate of 4.55%.
Principal due February 11,
2013.
    
    
    6,600,6501,000,000 Promissory
note, issued June 9, 2006
with interest payable
annually at a rate of 5.19%.
Principal due March 4, 2014.
    
    
    1,320,1305,000,000 Promissory
note, issued June 9, 2006
with interest payable
quarterly at a variable rate
of 3 month Libor +0.805%
(3.585% at December 31,
2006). Principal due January
16, 2013.
    
    
    6,600,6507,000,000 Promissory
note, issued June 9, 2006
with interest payable
annually at a rate of 5.13%.
Principal due February 4,
2014.
    
    
    9,240,9101,000,000 Promissory
note, issued June 9, 2006
with interest payable
annually at a rate of 4.70%.
Principal due February 4,
2014.
    
    
    1,320,130Total debt
    
    
    59,626,578Less: current portion
    
    
    20,201,950Total long term debt
    
    $
    39,424,628
 F-22




---



##### 



LONG TERM DEBT
  Year ending December 31,2007
    
    $
    20,201,9502008
    
    
    14,342,1582009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    25,082,470Total
    
    $
    59,626,578
    
 
 Arrangement fee
    
    $
    660,065Agency fee
    
    
    66,006Letter of credit fee
    
    
    968,096Warrants
    
    
    1,903,158Total loan costs
    
    
    3,597,325Accumulated amortization
    
    
    (276,718
    )Net loan costs
    
    $
    3,320,607
  F-23




---



##### 



LONG TERM DEBT
  SUBORDINATED DEBT
  2,000,000 Subordinated promissory note, issued January
25, 2005 with interest payable annually at a rate of 6.13%.
Principal due February 4, 2014
    
    $
    2,640,260Total subordinated debt
    
    
    2,640,260Less: current portion
    
    
    Total subordinated debt
    
    $
    2,640,260
  Year ending December 31,2007
    
    $
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    2,640,260Total
    
    $
    2,640,260
 F-24




---



##### 



ALLOWANCE FOR LOAN LOSS
  LEASES
   Commitments
    
    
    Sublease
    
    
    Net2007
    
    $
    367,131
    
    
    $
    (66,335
    )
    
    $
    300,7962008
    
    
    210,532
    
    
    
    
    
    
    
    210,5322009
    
    
    139,245
    
    
    
    
    
    
    
    139,2452010
    
    
    11,604
    
    
    
    
    
    
    
    11,6042011
    
    
    
    
    
    
    
    
    
    
    $
    728,512
    
    
    $
    (66,335
    )
    
    $
    662,177
   F-25




---



##### 



LEASES
  Commitments2007
    
    $
    1,151,9772008
    
    
    738,5112009
    
    
    738,5112010
    
    
    738,5112011
    
    
    738,511Thereafter
    
    
    325,105$
    4,431,126
 RELATED PARTY TRANSACTIONS
 Notes Payable
  Preferred Stock
  F-26




---



##### 



RELATED PARTY TRANSACTIONS
 Other Transactions and Relationships
  
    SHAREHOLDERS EQUITY
   F-27




---



##### 



SHAREHOLDERS EQUITY
   BENEFIT PLANS
     F-28




---



##### 



BENEFIT PLANS
 Pension Benefits2006Change in projected benefit obligationNet benefit obligation at beginning of period
    
    $
    719,786Service cost
    
    
    130,831Interest cost
    
    
    21,283Plan amendments
    
    
    281,516Benefits and expenses paid
    
    
    Actuarial (gain)/loss
    
    
    23,374Retiree contributions
    
    
    Net benefit obligation at end of year
    
    $
    1,176,790
 PensionBenefits(1)12/31/2006Change in plan assetsFair value of plan assets at beginning of period
    
    $
    Actual return on plan assets
    
    
    Employer contributions (receipts)
    
    
    Retiree contributions
    
    
    Benefits paid
    
    
    Fair value of plan assets at end of year
    
    
    Funded status at end of year
    
    $
    (1,176,790
    )Unrecognized transition obligation
    
    
    N/AUnrecognized prior service cost
    
    
    N/AUnrecognized net actuarial loss
    
    
    N/ANet asset (liability) recognized at end of year
    
    
    N/A
 F-29




---



##### 



BENEFIT PLANS
 Pension Benefits (1)12/31/2006Amounts recognized in the statement of
financial position prior to SFAS No. 158Accrued benefit cost
    
    
    N/AIntangible asset
    
    
    N/AAccumulated other comprehensive income
    
    
    N/ANet asset (liability) recognized at end
of year
    
    
    N/AAmounts recognized in the statement of
financial position under SFAS No. 158Noncurrent assets
    
    $
    Current liabilities
    
    
    Noncurrent liabilities
    
    
    (1,176,790
    )Net amount recognized at end of year
    
    $
    (1,176,790
    )Amounts not yet reflected in net periodic
benefit cost and included in accumulated other
comprehensive incomeTransition asset (obligation)
    
    $
    Prior service credit (cost)
    
    
    (266,852
    )Accumulated gain (loss)
    
    
    (23,375
    )Accumulated other comprehensive income
    
    
    (290,227
    )Cumulative employer contributions in
excess of net periodic benefit cost
    
    
    Net amount recognized at end of year
    
    $
    (290,227
    )Weighted average assumptions used to determine
benefit obligation at December 31:Discount rate
    
    
    4.50
    %Rate of compensation increase
    
    
    1.50
    %
 
 (1)
    
    N/A refers to not applicable under SFAS No. 158.  F-30




---



##### 



BENEFIT PLANS
  Before
    
    
    
    
    
    AfterApplication
    
    
    
    
    
    Applicationof
    
    
    
    
    
    ofSFAS
    
    
    
    
    
    SFASNo. 158
    
    Adjustments
    
    No. 158Noncurrent deferred income
tax assets
    
    $
    203,078
    
    
    
    101,580
    
    
    $
    304,658Total assets
    
    
    110,119,058
    
    
    
    101,580
    
    
    
    110,220,638Accrued pension costs
    
    
    (719,787
    )
    
    
    (457,003
    )
    
    
    (1,176,790
    )Total liabilities
    
    
    (97,069,384
    )
    
    
    (457,003
    )
    
    
    (97,526,387
    )Accumulated deficit
    
    
    9,406,180
    
    
    
    166,776
    
    
    
    9,572,956Accumulated other
comprehensive income
    
    
    (386,163
    )
    
    
    188,647
    
    
    
    (197,516
    )Total stockholders equity
    
    
    (13,049,674
    )
    
    
    355,423
    
    
    
    (12,694,251
    )
  2006Components of net periodic benefit cost:Service cost
    
    $
    130,831Interest cost
    
    
    21,283Expected return on plan assets
    
    
    Actuarial (gain) loss amortization
    
    
    Prior service cost amortization
    
    
    14,663Transition obligation amortization
    
    
    Net periodic benefit cost
    
    $
    166,777Weighted average assumptions used to determine
net periodic benefit cost for the years ended
December 31:Discount rate
    
    
    4.50
    %Expected return on plan assets
    
    
    0
    %Rate of compensation increase
    
    
    1.50
    %
  F-31




---



##### 



INCOME TAXES
  2006
    
    
    2005Income (loss) from operations
before income taxes:United States
    
    $
    938,905
    
    
    $
    (381,869
    )Germany
    
    
    (4,295,527
    )
    
    
    United Kingdom and others
    
    
    3,546,566
    
    
    
    (1,782,358
    )$
    189,944
    
    
    $
    (2,164,227
    )
 2006
    
    
    2005Income tax expense/(benefit):United States
    
    - Current
    
    $
    
    
    
    $
    - Deferred
    
    
    (39,634
    )
    
    
    Foreign
    
    - Current
    
    
    803,510
    
    
    
    - Deferred
    
    
    (163,446
    )
    
    
    Total
    
    $
    600,430
    
    
    $
    
 F-32




---



##### 



INCOME TAXES
  2006
    
    
    2005Expected tax/(benefit) at statutory rates
    
    
    64,284
    
    
    
    (735,837
    )Non-deductible foreign losses
    
    
    
    
    
    
    853,361Management fees from UK operations
    
    
    204,000
    
    
    
    204,000Non-deductible amortization of retained
loan servicing rights
    
    
    81,598
    
    
    
    648,654Tax amortization of goodwill
    
    
    (10,002
    )
    
    
    (10,002
    )Utilization of NOLs net of change in
valuation allowance
    
    
    294,911
    
    
    
    (963,764
    )Other
    
    
    (34,361
    )
    
    
    3,588Provision for income taxes from operation
    
    
    600,430
    
    
    
    Tax effect on accumulated comprehensive
income from adoption of SFAS #158
pension accounting
    
    
    (101,580
    )
    
    
    Provision for income taxes
    
    
    498,850
    
    
    
    
  F-33




---



##### 



INCOME TAXES
  2006
    
    
    2005Deferred tax assets:SFAS #158 Pension provision
    
       
    101,580
    
    
       
    Operating loss carry forward
    
    
    2,007,706
    
    
    
    3,235,105Loan loss reserves
    
    
    82,646
    
    
    
    82,593Goodwill
    
    
    25,839
    
    
    
    36,896Amortization of loan servicing rights
    
    
    
    
    
    
    7,660Depreciation and amortization
    
    
    49,523
    
    
    
    Other
    
    
    6,781
    
    
    
    Sub-total
    
    
    2,274,075
    
    
    
    3,362,251Valuation allowance
    
    
    (1,818,111
    )
    
    
    (3,340,418
    )Total assets
    
       
    455,964
    
    
       
    21,833Deferred tax liabilities:Discount on loan loss reserves
    
    
    (133,271
    )
    
       
    Depreciation and amortization
    
    
    (7,990
    )
    
    
    (21,833
    )Deferred loan servicing
    
    
    (10,045
    )
    
    
    Total liabilities
    
    
    (151,306
    )
    
    
    (21,833
    )Net deferred tax assets
    
       
    304,658
    
    
       
    
 MORTGAGE SERVICING FOR OTHERS
   F-34




---



##### 



MORTGAGE SERVICING FOR OTHERS
    VARIABLE INTEREST ENTITIES
  Crown European Holdings Limited
    F-35




---



##### 



 VARIABLE INTEREST ENTITIES
   
    
    An annual management fee based as a percentage of the asset value;
    
    Approximately $13,600 per month to cover management costs;
    
    Subject to board approval, 1% of the gross sales price of any assets sold;
    
    A promote fee as a percentage of net distributions if Return on Capital
Employed (ROCE) exceeded 20% per annum. However, the promote fee will not
exceed the amounts paid out in distributions to Kenmore and Mr. Roark.
   Crown Intressenter AB
  F-36




---



##### 



 VARIABLE INTEREST ENTITIES
   
    
    A fixed, annual management fee;
    
    Additional management fees of 0.20% of the initial book value of the portfolio
assets up to and including 1.4 Billion Swedish and 0.15% of book value in excess of 1.4
Billion Swedish Krona;
    
    Disposition fees equal to 1.25% plus VAT of the net proceeds from all single
property sales; and
    
    Promote fees defined as a portion of annual net distributable cash.
    Crown Intressenter Finland AB
  
 F-37




---



##### 



 VARIABLE INTEREST ENTITIES
  
  
    
    A fixed, annual management fee of 450,000 (approximately $594,000 at
December 31, 2006);
    
    Additional management fees of 0.18% of the initial book value of the portfolio
assets between 250,000,000 and 400,000,000 (approximately $330,032,500
and $528,052,000 at December 31, 2006) and 0.15% of book value in excess of
400,000,000;
    
    Disposition fees equal to 1.25% plus VAT of the net proceeds from all single
property sales; and
    
    Promote fees defined as a portion of annual net distributable cash.
   
  F-38




---



##### 



 VARIABLE INTEREST ENTITIES
   2006AssetsReceivablesLoan to Niam Retail
    
    $
    5,272,071Interest receivable Niam
    
    
    118,637Investment in Niam Retail
    
    
    1,399Cash and other
    
    
    71,970Total assets
    
    $
    5,464,077Liabilities and stockholders equityLoans payableForum
    
    $
    3,955,103Shareholders
    
    
    1,316,968Accrued interest payable
    
    
    118,622Other liabilities
    
    
    70,426Stockholders equity
    
    
    2,958Total liabilities and stockholders equity
    
    $
    5,464,077Income statementInterest income
    
    $
    118,661Total revenue
    
    
    118,661Interest expense
    
    
    118,622Administration costs
    
    
    11,602Total expenses
    
    
    130,224Net income
    
    $
    (11,563
    )
 F-39




---



##### 



CONTINGENCIES
 Axfood Shares
    Letters of Credit
  Other
  F-40




---



##### 



CONTINGENCIES
      F-41




---



##### 



FAIR VALUE
   2006
    
    2005Carrying
    
    Estimated
    
    Carrying
    
    EstimatedValue
    
    Fair Value
    
    Value
    
    Fair ValueFinancial assets:Cash and other short term
financial instruments
    
    $
    57,586,963
    
    
    $
    57,586,963
    
    
    $
    2,842,482
    
    
    $
    2,842,482Loans
    
    $
    6,803,584
    
    
    $
    6,803,584
    
    
    $
    647,607
    
    
    $
    647,607Servicing Rights
    
    $
    4,508,701
    
    
    $
    4,508,701
    
    
    $
    4,830,765
    
    
    $
    4,830,765Financial liabilities:Long term debt and
subordinated debt
    
    $
    39,424,628
    
    
    $
    39,424,628
    
    
    $
    
    
    
    $
    
 SUBSEQUENT EVENTS
 
  
  F-42




---



##### 



Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 8A.  Controls and Procedures
  
 Item 8B.  Other Information
    Subsidiaries
  13




---



##### 



ESOP
   
 PART III
 
 Item 9.  Directors and Executive Officers Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(e) of the Exchange Act.
   Name
    
    Age
    
    Position with CompanyStefan Lennhammer
    
    44
    
    ChairmanRonald E. Roark
    
    56
    
    Vice Chairman, Chief Executive Officer and DirectorGordon V. Smith
    
    74
    
    DirectorGrace Jenkins
    
    55
    
    DirectorJohn S. Koczela
    
    55
    
    DirectorDavid K. Conrad
    
    51
    
    DirectorPeter Walker
    
    43
    
    DirectorRoy H. Owen
    
    60
    
    Director and Managing Director, United StatesClarence Dixon
    
    46
    
    Managing Director, Continental EuropeHakan Larsson
    
    38
    
    Managing Director, Crown Asset Management, Sweden
 14




---



##### 



Name
    
    Age
    
    Position with CompanySteven Winfield
    
    49
    
    Co-Managing Director, Crown Mortgage Management, United KingdomJulien Holmes
    
    37
    
    Co-Managing Director, Crown Mortgage Management, United KingdomDavid Scrivener
    
    45
    
    Assistant Secretary and ControllerRick Lewis
    
    53
    
    Vice President, Treasurer and Chief Financial Officer of CrownJoachim Paulus
    
    57
    
    Managing Director, Westfalenbank AGChristian von Villiez
    
    48
    
    Managing Director, Westfalenbank AGThomas Vail
    
    40
    
    Managing Director, Crown Westfalen Credit ServicesLuther Ziller
    
    61
    
    Managing Director, Crown Westfalen Credit Services
   Stefan Lennhammer
 Ronald E. Roark
 Gordon V. Smith
 Grace Jenkins
 John S. Koczela
 15




---



##### 



David K. Conrad
 Peter Walker
 Roy H. Owen
 Clarence Dixon
 Hakan Larsson
 Steven Winfield
 Julien Holmes
 David Scrivener
 Rick Lewis
 Dr. Joachim Paulus
 Dr. Christian von Villiez
 16




---



##### 



Thomas Vail
 Luther Ziller
 Audit Committee Financial Expert
  Code of Ethics
  
 Item 10.  Executive Compensation
 Summary Compensation Table
   Name
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Equityand
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    Option
    
    Incentive PlanPrincipal
    
    
    
    
    
    Salary
    
    Bonus
    
    Awards
    
    Awards
    
    Compensation
    
    TotalPosition
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)
    
    (j)Ronald E. Roark,
Chief Executive
Officer
    
    
    2006
    
    
    
    100,000
    
    
    
    125,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    225,000Clarence Dixon
    
    
    2006
    
    
    
    237,623
    (1)
    
    
    66,007
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    303,630Peter Walker
    
    
    2006
    
    
    
    186,614
    (1)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    186,614
 
 (1)
    
    Messrs. Walker and Dixons salaries in Dollars ($) were determined by the exchange rate
as of December 31, 2006. Outstanding Equity Awards at Fiscal Year-End
  17




---



##### 



Director Compensation
  Change inPensionFees
    
    
    
    
    
    
    
    
    
    
    
    
    
    Value andEarned or
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    NonqualifiedPaid in
    
    Stock
    
    Options
    
    Incentive Plan
    
    Deferred
    
    All OtherCash
    
    Awards
    
    Awards
    
    Compensation
    
    Compensation
    
    Compensation
    
    TotalName
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    Earnings
    
    ($)
    
    ($)(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)
    
    (h)Stefan Lennhammer,
ChairmanRonald E. Roark,
Vice ChairmanDavid K. Conrad
    
    $
    8,750
    
    
    $
    8,750
    (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,500Grace Jenkins
    
    $
    7,250
    
    
    $
    7,250
    (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,957.82
    
    
    $
    33,457.82John S. Koczela
    
    $
    8,750
    
    
    $
    8,750
    (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,936.19
    
    
    $
    27,436.19Roy H. OwenGordon V. Smith
    
    $
    8,750
    
    
    $
    8,750
    (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,500Peter Walker
 
 (1)
    
    Dollar value of stock awards were calculated at $0.10 per share.  
 Item 11.  Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  18




---



##### 



Number of Shares
    
    ApproximateName
    
    Of Common Stock
    
    Percent of ClassStefan Lennhammer (1)
    
    
    0
    
    
    
    n/aRonald E. Roark (2)
    
    
    12,312,665
    
    
    
    41.1
    %Gordon V. Smith(3)
    
    
    4,298,560
    
    
    
    14.4
    %Grace Jenkins
    
    
    622,500
    
    
    
    2.0
    %David K. Conrad (4)
    
    
    692,500
    
    
    
    2.3
    %Peter Walker (5)
    
    
    350,000
    
    
    
    1.1
    %John S. Koczela
    
    
    180,000
    
    
    
    (6
    )Roy H. Owen
    
    
    0
    
    
    
    n/aClarence Dixon
    
    
    0
    
    
    
    n/aHakan Larsson
    
    
    0
    
    
    
    n/aSteven Winfield (5)
    
    
    0
    
    
    
    n/aJulien Holmes (5)
    
    
    0
    
    
    
    n/aDavid Scrivener (5)
    
    
    0
    
    
    
    n/aRick Lewis
    
    
    1,000
    
    
    
    (6
    )Stephen W. Brown
    
    
    8,500
    
    
    
    (6
    )All directors and executive officers as a group
(15 persons)
    
    
    18,605,725
    
    
    
    61.0
    %
 
 (1)
    
    The mailing address for Mr. Lennhammer is c/o REEDA Management AB, Skeppargartan 7, SE-114
52, Stockholm, Sweden.(2)
    
    6,858,037 of these shares are still held in the name of Royal Investments. Equity ownership
of these shares lies with Ron Roark. Upon completion of the Stock Splits these shares will
convert to treasury shares of Crown. The company anticipates this to be completed in 2007.(3)
    
    Represents 376,739 shares held by Mr. Smith and 53,867 shares held by The Gordon V. and Helen
C. Smith Foundation. The mailing address for both Mr. Smith and the Smith Foundation is c/o
Miller and Smith Holding, Inc., 1568 Springhill Road, McLean, Virginia 22102. Mr. Smith, as
president of the Smith Foundation, may be deemed the beneficial owner of such shares. Mr.
Smith disclaims such beneficial ownership.(4)
    
    The mailing address for Mr. Conrad is c/o Bricker & Eckler LLP, 100 South Third Street,
Columbus, Ohio 43215. The shares are owned by Bricker & Eckler LLP.(5)
    
    The mailing address for Messrs. Walker and Scrivener is c/o CNL, Crown House, Crown Street,
Ipswich, IP1 3HS UK.(6)
    
    Less than 1%. 19




---



##### 



Item 12.  Certain Relationships and Related Transactions
 Merger Transaction with Royal and Related Transactions
   
 Chairman and Vice Chairman
  
  Other Transactions and Relationships
  20




---



##### 



Item 13.  Exhibits
  Number
    
    Exhibit
    
    Method of Filing3.3
    
    Restated Certificate of Incorporation
    
    Filed herewith.3.4
    
    Bylaws
    
    Filed herewith.14.1
    
    Code of Ethics
    
    Incorporated by reference to CrownNorthCorp, Inc.s Form 10-KSBfiled April 14, 2004.21.10
    
    Subsidiaries of Crown NorthCorp, Inc.
    
    Filed herewith.31.11
    
    Certification of officers of Crown
    
    Filed herewith.32.10
    
    Certification of officers of Crown
    
    Filed herewith.
 21




---



##### 



Item 14.  Principal Accountant Fees and Services
  Audit Fees
    
    Audit-Related Fees
    
    Tax Fees
    
    All Other Fees2006
    
    $
    442,239
    
    
    $
    82,616
    
    
    $
    112,716
    
    
    
    02005
    
    $
    224,525
    
    
    
    0
    
    
    $
    87,408
    
    
    
    0
 22




---



##### 



SIGNATURES
  Date: April 17, 2007
    Crown NorthCorp, Inc.By:
    s/ Ronald E. RoarkRonald E. Roark, Vice Chairmanand Chief Executive Officer  Date:      April 17, 2007
    By:
    s/ Stefan LenhammerStefan Lennhammer, Chairman Date:      April 17, 2007
    By:
    s/ Ronald E. RoarkRonald E. Roark, Vice Chairman andChief Executive Officer
(Principal Executive Officer) Date:      April 17, 2007
    By:
    s/ Rick L. LewisRick L. Lewis, Vice President,Treasurer and Chief Financial
Officer
(Principal Accounting Officer) Date:      April 17, 2007
    By:
    s/ Gordon V. SmithGordon V. Smith, Director Date:      April 17, 2007
    By:
    s/ Grace JenkinsGrace Jenkins, Director Date:      April 17, 2007
    By:
    s/ John S. KoczelaJohn S. Koczela, Director 23




---



##### 



Date:      April 17, 2007
    By:
    s/ Peter WalkerPeter Walker, Director Date:      April 17, 2007
    By:
    s/ Roy OwenRoy H. Owen, Director 24




---



##### 



INDEX TO EXHIBITS
 3.3
    
    Restated Certificate of Incorporation (1)3.4
    
    Bylaws (1)14.1
    
    Code of Ethics (2)21.10
    
    Subsidiaries of Crown NorthCorp, Inc. (1)31.11
    
    Certification of officers of Crown (1)32.10
    
    Certification of officers of Crown (1)
 
 (1)
    
    Filed herewith.(2)
    
    Incorporated by reference to Crown NorthCorp, Inc.s Form 10-KSB filed April 14, 2004.