UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                 FORM 10-K/A-#2



[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2005

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934

        For the transition period from              to
                                       ------------    ------------

                        Commission File Number 000-27437
                        --------------------------------



                          PARAGON FINANCIAL CORPORATION
                          -----------------------------
             (Exact name of registrant as specified in its charter)




                         Delaware                              94-3227733
                         --------                              ----------
               (State or other jurisdiction                  (I.R.S. Employer
                of incorporation)                            Identification No.)

               2207 Sawgrass Village Drive                         32082
               ---------------------------                         -----
                  Ponte Vedra Beach, FL                           (Zip Code)
         (Address of principal executive offices)

       Registrant's telephone number, including area code: (904) 285-0000
       ------------------------------------------------------------------

           Securities registered pursuant to Section 12(b) of the Act:
           -----------------------------------------------------------
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
           -----------------------------------------------------------
                         Common Stock, $0.0001 par value


Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. [ ] Yes [X] No

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. [ ] Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]


<PAGE>





Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

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

There is no non-voting  common equity.  The aggregate market value of the common
stock  held by  nonaffiliates  (based  upon the  closing  price of $0.04 for the
shares  on the  Nasdaq  National  Market  on June 30,  2005)  was  approximately
$2,232,175,  as of June 30, 2005. For this purpose,  shares of the  registrant's
common  stock  known to the  registrant  to be held by its  executive  officers,
directors,  certain  immediate  family  members  of the  registrant's  executive
officers and  directors  and each person known to the  registrant  to own 10% or
more of the  outstanding  voting power of the  registrant  have been excluded in
that  such  persons  may be  deemed  to be  affiliates.  This  determination  of
affiliate  status is required by Form 10-K and shall not be deemed to constitute
an  admission  that any  such  person  is an  affiliate  and is not  necessarily
conclusive for other purposes.

     As of April 1, 2006,  there  were  269,133,486  shares of the  registrant's
common stock issued and outstanding.


                                EXPLANATORY NOTE

This Form  10-K/A #2 (the  "Amendment")  amends our Form 10-K for the year ended
December 31, 2005,  which was filed with the Securities and Exchange  Commission
on May 3, 2006 (the  "Original  Filing").  We are filing  this Form  10-KSB/A to
amend the Financial Statements.

In  connection  with the  filing of this Form  10-K/A #2 and  pursuant  to Rules
13a-14(a)  or  15d-14(a)  under  the  Securities  Exchange  Act of 1934,  we are
including with this Form 10-K/A #2 certain currently dated certifications.

This  Amendment  does not reflect  events  occurring  after the Original  Filing
except as noted above. Except for the foregoing amended  information,  this Form
10-K/A  #2  continues  to speak as of the date of the  Original  Filing  and the
Company has not otherwise  updated  disclosures  contained  therein or herein to
reflect events that occurred at a later date.



<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                                 <C>




                                           TABLE OF CONTENTS


                                           PART I                                                   Page
                                           ------                                                   ----

Item 1.         Business   *                                                                           2
Item 1A.        Risk Factors.                                                                          7
Item 1B.        Unresolved Staff Comments.                                                            15
Item 2.         Properties.  *                                                                        18
Item 3.         Legal Proceedings                                                                     18
Item 4.         Submission of Matters to a Vote of Security Holders.                                  19

                                          PART II

Item 5.         Market for Registrant's Common Equity and Related Stockholder Matters *               20
Item 6.         Selected Financial Data.  *                                                           21
Item 7.         Management's  Discussion and Analysis of Financial Condition and Results
                of Operations.                                                                        22
Item 7A.        Quantitative and Qualitative Disclosures About Market Risk.  *                        35
Item 8.         Financial Statements and Supplementary Data. *                                        36
Item 9.         Changes in and Disagreements With Accountants on Accounting and Financial
Item 9A.        Controls and Procedures.                                                              36
Item 9B.        Other Information.                                                                    37

                                         PART III

Item 10.        Directors and Executive Officers of the Registrant.                                   37
Item 11.        Executive Compensation.                                                               41
Item 12.        Security Ownership of Certain Beneficial Owners and Management and Related            44
Item 13.        Certain Relationships and Related Transactions.                                       45
Item 14.        Principal Accountant Fees and Services.                                               46

                                         PART IV

Item 15.        Exhibits, Financial Statement Schedules.                                              46
                Signatures.                                                                           48

</TABLE>

* - Unless stated otherwise, dollars are in thousands, except per share amounts.



<PAGE>



                                     PART I


FORWARD-LOOKING STATEMENTS

We  believe  that  it is  important  to  communicate  our  expectations  to  our
investors.  Accordingly,  this report contains  discussions of events or results
that have not yet  occurred  or been  realized.  You can  identify  this type of
discussion,  which is often termed "forward-looking  statements",  by such words
and phrases as "will","explore", "consider","continue","expects", "anticipates",
"intends",  "plans",  "believes",  "estimates"  and "could be".  You should read
forward-looking   statements   carefully   because   they   discuss  our  future
expectations,  contain projections of our future results of operations or of our
financial position, or state other expectations of future performance. There may
be events in the future that we are not able  accurately  to predict or control.
Any cautionary language in this report provides examples of risks, uncertainties
and events that may cause our actual results to differ from the  expectations we
express  in our  forward-looking  statements.  You  should  be  aware  that  the
occurrence  of certain of the events  described in this report  could  adversely
affect our business, results of operations and financial position.

These forward-looking statements are based on information available to us on the
date  hereof,  and we assume no  obligation  to update any such  forward-looking
statement. It is important to note that our actual results and timing of certain
events could differ materially from those in such forward-looking statements due
to a number of  factors,  including  but not  limited  to, the  ability to raise
capital  necessary to sustain  operations  and implement the business  plan, the
ability to obtain additional  regulatory permits and approvals to operate in the
financial  services area, the ability to identify and complete  acquisitions and
successfully integrate acquired businesses, if any, the ability to implement our
business plan, changes in the real estate market,  interest rates or the general
economy of the  markets in which we  operate,  the  ability to employ and retain
qualified management and employees,  changes in government  regulations that are
applicable to our businesses,  the general volatility of the capital markets and
the  establishment  of a market  for our  shares,  changes in the demand for our
services,  our  ability  to meet our  projections,  the  degree  and  nature  of
competitors,  the  ability to generate  sufficient  cash to pay  creditors,  and
disruption in the economic and financial conditions primarily from the impact of
past terrorist attacks in the United States,  threats of future attacks,  police
and  military  activities  overseas  and other  disruptive  worldwide  political
events.  Other risk factors that could cause actual results to differ materially
are set forth in this item under the heading "Management Discussion and Analysis
of Financial Condition and Results of Operations - Overview" on page 20.


<PAGE>



ITEM 1.           BUSINESS.

General
-------

We are a financial  services company focused on acquiring  mortgage  origination
companies that broker mortgage  products in the one-to-four  family  residential
mortgage market.  We focus primarily on offering  mortgage products to borrowers
who generally satisfy the credit,  documentation or other underwriting standards
prescribed by conventional  mortgage lenders and loan buyers, such as Fannie Mae
and Freddie Mac (referred to as conforming  loans).  We originate these loans in
accordance with the underwriting guidelines of those lenders. As a result of our
recent  acquisitions  of SHL and EHC Corp., we are licensed in and can originate
home  mortgages in 40 states.  Our  executive  offices are located in Las Vegas,
Nevada.  We were  incorporated  in  Delaware  in August  1999 under the name PRx
Holdings, Inc. Our mortgage operations were acquired by us in January 2003.

At December 31, 2005,  our mortgage loan  origination  business was comprised of
twenty loan officers.  We broker the loans we originate to third-party  lenders.
In 2005, we placed 85% of the mortgages we brokered with two particular  lenders
to receive the  highest  level of  execution.  Our loan  officers  were based in
Florida,  and 100% of our brokered loan volume relates to real property  located
in  Florida.  With our  subsequent  acquisitions  of SHL and EHC Corp.,  we have
substantially  increased our  geographic  coverage and are licensed to originate
mortgage loans in over 40 states.

Company History and Acquisitions

We  originally  operated  as an  online  healthcare  destination  under the name
PlanetRx.com.  In mid-2001 we began the process of liquidating our online health
store and seeking a merger partner as an alternative to complete liquidation.

On May 31, 2002, the Company  merged with Paragon  Homefunding,  Inc.  ("Paragon
Delaware"),  a  privately-held  development  stage  company based in Ponte Vedra
Beach, Florida, formed for the purpose of entering the financial services market
through acquisitions. Paragon Delaware was incorporated in Delaware on August 3,
2001. For financial reporting  purposes,  the merger has been accounted for as a
recapitalization  of  Paragon  Delaware  with  Paragon  Delaware  viewed  as the
accounting   acquirer  in  what  is  commonly  called  a  reverse   acquisition.
Accordingly,  the financial  statements presented before the merger are those of
Paragon  Delaware.  As a result  of the  merger,  a new Board of  Directors  was
elected and new officers  were  appointed.  On December 26, 2002, we changed our
name to Paragon Financial Corporation ("PFC").

On January 31, 2003, we completed our acquisition of Mortgage Express, Inc. (now
known as PGNF Home Lending Corp.) ("PGNF").  PGNF was a mortgage bank focused on
the wholesale  sub-prime  credit  market.  On May 31, 2004, we divested PGNF and
exited the  wholesale  sub-prime  mortgage  banking  business.  PGNF is shown as
discontinued operations in the Management's Discussion and Analysis of Financial
Condition  and Results of  Operations  beginning  on page 20, and our  financial
statements beginning on page F-1, and elsewhere in this Form 10-K.

                                       2
<PAGE>





On February 2, 2003, we completed the acquisition of Paragon  Homefunding,  Inc.
("PHF"), a Florida  corporation focused primarily on the brokering of conforming
loans.  PHF represents our continuing  operations in the "Management  Discussion
and Analysis of Financial Condition and Results of Operations" beginning on page
20, our financial  statements  beginning on page F-1, and elsewhere in this Form
10-K.

On January 19, 2005, we completed our acquisition of First Charleston  Mortgage,
LLC ("FCM"),  a South Carolina limited liability  company.  As consideration for
the  acquisition,  we issued  4,285,714  shares of our $0.0001 par value  common
stock  valued at $214 (or  $0.05 per  share).  FCM has been in the  business  of
originating  residential  mortgage loans since 2002 and focused primarily on the
brokering of conforming loans. Subsequently,  we agreed to rescind the agreement
with FCM and its  holders  effective  December  31,  2005.  As a result  of this
agreement,  3,500,785  shares  of  our  common  stock  were  returned  to us and
cancelled.  The 784,929 shares of our common stock not returned are treated as a
non-recurring  expense  of  approximately  $31  in  the  accompanying  financial
statements  presented  elsewhere in this Form 10-K.  The financial and operating
information in this Form 10-K excludes the operations of FCM.

On February 7, 2006, we acquired Shearson Home Loans, Inc., a Nevada corporation
("SHL"),  from Consumer Direct of America,  Inc. ("CDA"),  pursuant to the terms
and conditions of a Share Exchange  Agreement (the "SHL  Agreement")  among CDA,
SHL and us.  Pursuant to the SHL Agreement,  we acquired all of the common stock
of SHL for 149,558,791  shares of our common stock and 79 shares of our Series F
Preferred Stock (convertible into 443,217,018 shares of our Common Stock).  Each
share of the Series F Preferred Stock automatically  converts into shares of our
common stock upon the filing of an  amendment to our articles of  incorporation.
We are currently reviewing certain representations and warranties of CDA and SHL
contained in the SHL Agreement to resolve certain issues relating thereto.

On March 21, 2006,  subject to the filing of an  application  with certain state
regulatory  agencies,  we agreed to acquire  all of the  issued and  outstanding
shares of common stock of eHOMECREDIT  CORP.  ("EHC"),  a New York  corporation,
from its shareholders ("Shareholders"),  pursuant to the terms and conditions of
a Share Exchange Agreement (the "EHC Agreement") among Shareholders, EHC and us.
Pursuant to the EHC  Agreement,  we agreed to exchange  1,000,000  shares of our
Series G Preferred  Stock  (convertible  into  100,000,000  shares of our common
stock), valued at approximately $7,000,000, for all of the outstanding shares of
EHC. Each share of the Series G Preferred Stock automatically  converts into 100
shares of our common  stock upon the filing of an  amendment  to our articles of
incorporation.  Immediately  prior to entering  into the EHC  Agreement,  we had
271,750,151  shares of our common stock  outstanding.  EHC is a leading mortgage
banker with headquarters in Garden City, New York, and is licensed to lend in 40
states.

                                       3

<PAGE>




Growth and Operating Strategies

We plan to pursue  several  strategies  to increase  revenue and  profitability.
These  strategies  include:  (i) pursuing  acquisitions  of  financial  services
companies,  (ii) increasing our mortgage loan  origination  volume by recruiting
seasoned loan officers with relationship  driven mortgage  origination  business
and  organic  opening  offices  in  attractive   geographic   locations,   (iii)
streamlining  business  processes  through  the  deployment  of  technology  and
building a mortgage  origination  platform that allows loan officers to maximize
their  business,  and (iv)  increasing  the revenue per loan by  establishing  a
short-term mortgage banking platform.

The key tactics for pursuing these strategies include:

o           Pursuing acquisitions: We intend to pursue an aggressive acquisition
            strategy of   acquisitions of financial  services companies as well
            as mortgage brokerage firms.
o           Increasing  loan  origination  volume:  We intend to  increase  loan
            origination  volume  through  geographic  expansion  in  high-growth
            markets  and  the   recruiting   of  seasoned   loan  officers  with
            relationship  driven mortgage  origination  business  allowing us to
            increase market penetration in existing markets.
o           Streamlining   business   processes   through  the   deployment   of
            technology:  We intend to continue our best practices  initiative to
            streamline  our business  processes and use technology to drive loan
            origination  and  administrative  costs  lower  and  provide  better
            service to our customers.  As a result of our recent acquisitions of
            Shearson and EHC, we believe that the  operating  infrastructure  we
            have in place is capable of integrating a significant  number of new
            loan officers and new locations with  relatively  little  additional
            increase in general and administrative expenses.
o           Increasing  the revenue per loan:  We intend to develop a short-term
            warehousing  and banking  platform  that we believe will allow us to
            obtain higher revenue per loan without  incurring  additional  risk.
            Further,  we plan to  develop  a broad  range of  products  that are
            desirable in the markets in which we compete.

Product Types

We broker a broad range of mortgage  products that include both fixed-rate loans
and adjustable-rate loans, or ARMs. In addition, these products are available at
different  interest rates and with different  origination and application points
and fees depending on the particular  borrower's risk classification.  Borrowers
may choose to increase or decrease  their  interest  rate through the payment of
different levels of origination  fees. The maximum loan amount is generally $500
with a  loan-to-value  ratio of up to 80%. We do,  however,  broker larger loans
with higher  loan-to-value  ratios  through  special jumbo  programs  offered by
lenders. During 2005, the average loan amount was approximately $163 compared to
$167 in 2004.

                                       4

<PAGE>




Loan Originations

We originate  loans directly to consumers  through our loan officers  located in
our retail offices.  Leads are generated through radio,  direct mail,  referrals
and the internet.  We originated a total of $78.2 million in mortgage  loans for
the twelve  months  ended  December 31, 2005  compared to $86.4  million for the
twelve months ended 2004.

Geographic Distribution

In 2005  and  2004,  all of our  mortgage  loans  originated  by our  continuing
operations were originated by PHF in Florida.

Competition

We continue to face intense competition in the business of originating  mortgage
loans.  Our competitors  include other mortgage  brokering  companies,  mortgage
banking companies, consumer finance companies,  commercial banks, credit unions,
thrift  institutions,  credit card  issuers  and  insurance  finance  companies.
Federally  chartered  banks and thrifts can preempt  some of the state and local
lending  laws  to  which  we are  subject,  thereby  giving  them a  competitive
advantage.  In addition,  many of these  competitors have  considerably  greater
technical and  marketing  resources  than we have.  Competition  among  industry
participants  can take many forms,  including  convenience  in obtaining a loan,
customer service,  marketing and distribution  channels,  amount and term of the
loan, loan origination fees and interest rates. Additional competition may lower
the rates we can charge borrowers,  thereby potentially lowering gains on future
loan sales.

Regulation

Our business is regulated by federal,  state, and local  government  authorities
and  is  subject  to  extensive  federal,   state  and  local  laws,  rules  and
regulations.  We are also subject to judicial and administrative  decisions that
impose  requirements  and  restrictions  on our business.  At the federal level,
these laws and regulations  include the: Equal Credit  Opportunity  Act; Federal
Truth in Lending Act and Regulation Z; Home Ownership and Equity Protection Act;
Real Estate  Settlement  Procedures  Act; Fair Credit  Reporting  Act; Fair Debt
Collection  Practices  Act;  Home  Mortgage  Disclosure  Act;  Fair Housing Act;
Telephone  Consumer  Protection Act;  Gramm-Leach-Bliley  Act; Fair and Accurate
Credit  Transactions Act; CAN-SPAM Act;  Sarbanes-Oxley Act; and the USA PATRIOT
Act.

                                       5

<PAGE>




These  laws,  rules  and  regulations,  among  other  things:  impose  licensing
obligations and financial  requirements on us; limit the interest rates, finance
charges,  and other fees that we may  charge;  prohibit  discrimination;  impose
underwriting requirements; mandate disclosures and notices to consumers; mandate
the  collection  and reporting of  statistical  data  regarding  our  customers;
regulate  our  marketing  techniques  and  practices;  require  us to  safeguard
non-public  information about our customers;  regulate our collection practices;
require  us  to  prevent  money-laundering  or  doing  business  with  suspected
terrorists;  and impose  corporate  governance,  internal  control and financial
reporting obligations and standards.

Our failure to comply with these laws can lead to: civil and criminal liability;
loss of approved status;  demands for  indemnification  or loan repurchases from
buyers of our loans;  class  action  lawsuits;  and  administrative  enforcement
actions.

Compliance, Quality Control and Quality Assurance

We regularly  monitor the laws, rules and regulations that apply to our business
and analyze any changes to them.  We also  maintain  policies and  procedures to
help our origination personnel comply with these laws.

Our training  programs are designed to teach our personnel about the significant
laws,  rules and  regulations  that affect their job  responsibilities.  We also
maintain a variety of pre-funding  quality control procedures designed to detect
compliance errors prior to brokering a loan.

Licensing
As of December 31, 2005, we were licensed to originate mortgages in the state of
Florida.  Our  subsequent  acquisitions  of  Shearson  Home  Loans and EHC Corp.
substantially  expanded  the number of states we are licensed in and in which we
can originate mortgage loans.

Environmental

In the course of our business, we may acquire properties securing loans that are
in default. There is a risk that hazardous or toxic waste could be found on such
properties.  If this occurs,  we could be held responsible  under applicable law
for the cost of cleaning up or removing  the  hazardous  waste.  This cost could
exceed the value of the underlying properties.

                                       6

<PAGE>




Employees

The table  below  presents  the number of our  employees  or FTEs at February 1,
2006, prior to our mergers with Shearson Home Loans and EHC Corp:


                             Loan officers                               20
                             Loan processors                              3
                             Administrative personnel                     7
                             Corporate                                    3
                                                                          -
                             Total                                       33
                                                                         ==

The employees are not represented by a collective  bargaining  unit. We consider
relations with employees to be good.

Available Information

Through our  website  (www.pgnf.com),  we make  available,  free of charge,  our
annual reports on Form 10-K,  quarterly reports on Form 10-Q, current reports on
Form 8-K,  Section 16 reports  and any  amendments  to those  reports as soon as
reasonably practicable after such reports or amendments are electronically filed
with or furnished to the Securities and Exchange Commission.


ITEM 1A.        RISK FACTORS.

Set forth below and  elsewhere  in this Annual  Report on Form 10-K and in other
documents  we file with the  Securities  and Exchange  Commission  are risks and
uncertainties  that could cause  actual  results to differ  materially  from the
results contemplated by the forward-looking  statements contained in this Annual
Report on Form 10-K.


Risk Factors

Stockholders  and  prospective  purchasers of our common stock should  carefully
consider the risks  described  below before  making a decision to buy our common
stock.  If any of the following  risks  actually  occurs,  our business could be
harmed.  In that case, the trading price of our common stock could decline,  and
you may lose all or part of your investment. When determining whether to buy our
common stock,  stockholders and prospective  purchasers should also refer to the
other information in this Form 10-K,  including our financial statements and the
related notes.

Risks Related to Our Business

An increase in interest  rates could result in a reduction in our loan brokerage
volumes,  an increase in first  payment  defaults  on loans we  brokered,  and a
reduction in the revenue per loan brokered.

                                       7
<PAGE>





The  following  are some of the risks we face related to an increase in interest
rates:

o        A substantial  and sustained  increase in interest rates could harm our
         ability to originate  loans because  refinancing an existing loan would
         be less  attractive  and  qualifying  for a  purchase  loan may be more
         difficult; and

o        If prevailing  interest rates increase after we receive a commitment to
         fund a loan,  the value  that we  receive  upon  brokering  of the loan
         decreases.

Our  business  may be  significantly  harmed by a  slowdown  in the  economy  of
Florida, where we conduct a significant amount of business.

Historically,  all of the mortgage  loans we have  brokered have been secured by
property  in the state of Florida.  A decline in the economy or the  residential
real estate  market in Florida could  restrict our ability to broker loans,  and
significantly harm our business,  financial condition,  liquidity and results of
operations.  As we integrate  our recent  acquisitions  of SHL and EHC, we might
face the same risk in geographic  locations where SHL or EHC have concentrations
of mortgage originations.

Our  business  may be  significantly  harmed by the weather in markets  where we
conduct a significant  amount of business.

In 2004, our PHF subsidiary saw a significant reduction in mortgage loans due to
the hurricanes that affected the state of Florida.  Hurricanes and other natural
phenomena  could hurt the real estate  markets in which we operate and  restrict
our ability to originate loans. For example, insurers of residential real estate
will not write  hazard and flood  insurance  policies in advance of  approaching
tropical  storms or  hurricanes.  This would  significantly  harm our  business,
financial condition, liquidity and results of operations.

We face intense competition that could adversely impact our market share and our
revenue.

We face  intense  competition  from  other  financial  and  mortgage  companies,
internet-based  lending  companies  where entry barriers are relatively low, and
from traditional bank and thrift lenders to the mortgage industry. As we seek to
expand our business  further,  we will face a  significant  number of additional
competitors,  many of whom will be  well-established  in the  markets we seek to
penetrate.   Some  of  our  competitors  are  much  larger,   have  better  name
recognition, and have far greater financial and other resources than us.

                                       8
<PAGE>




The government-sponsored  entities Fannie Mae and Freddie Mac are also expanding
their  participation  in  the  mortgage  industry.  These   government-sponsored
entities have a size and  cost-of-funds  advantage  that allows them to purchase
loans  with  lower  rates  or fees  than we are  willing  to  offer.  While  the
government-sponsored  entities  presently  do not have the  legal  authority  to
originate  mortgage  loans,  they do have the authority to buy loans. A material
expansion of their  involvement in the market to purchase loans could change the
dynamics of the  industry by virtue of their sheer size,  pricing  power and the
inherent  advantages  of a government  charter.  In addition,  if as a result of
their  purchasing  practices,  these  government-sponsored  entities  experience
significantly  higher-than-expected  losses,  such  experience  could  adversely
affect the overall investor perception of the mortgage industry.

The  intense  competition  in the  mortgage  industry  has  also  led  to  rapid
technological developments, evolving industry standards and frequent releases of
new  products  and  enhancements.  As mortgage  products are offered more widely
through  alternative  distribution  channels,  such as the  internet,  we may be
required  to make  significant  changes to our  current  retail  operations  and
information systems to compete effectively.  Our inability to continue enhancing
our  current  capabilities,  or to adapt to other  technological  changes in the
industry, could significantly harm our business, financial condition,  liquidity
and results of operations.

Competition  in the industry can take many forms,  including  interest rates and
costs of a loan, less stringent underwriting standards, convenience in obtaining
a  loan,  customer  service,  amount  and  term  of a  loan  and  marketing  and
distribution  channels.  The  need to  maintain  mortgage  loan  volume  in this
competitive  environment  creates a risk of price  competition  in the  mortgage
industry.  Price  competition could cause us to lower the interest rates that we
offer  borrowers,  which could lower the value of our loans.  If our competitors
adopt less  stringent  underwriting  standards  we will be pressured to do so as
well, which would result in greater loan risk without  compensating  pricing. If
we do not relax  underwriting  standards in response to our competitors,  we may
lose market  share.  Any increase in these  pricing and  underwriting  pressures
could  reduce the volume of our loan  originations  and sales and  significantly
harm our business, financial condition, liquidity and results of operations.

Defective loans may harm our business.

In connection  with the  origination of loans, we are required to make a variety
of customary  representations  and warranties  regarding the loans we originate,
primarily related to fraud on the application and first payment defaults.  These
representations  and warranties  relate to, among other things,  compliance with
laws; regulations and underwriting standards; the accuracy of information in the
loan documents and loan file; and the  characteristics and enforceability of the
loan.

                                       9

<PAGE>




We are subject to losses due to  fraudulent  and  negligent  acts on the part of
loan applicants, mortgage brokers, other vendors and our employees.

When we originate  mortgage loans, we rely heavily upon information  supplied by
third  parties  including  the  information  contained  in the loan  application
regarding   employment  and  income  history,   property   appraisal  and  title
information.  Whether a  misrepresentation  is made by the loan  applicant,  the
mortgage broker, another third party or one of our own employees,  we often bear
the risk of loss associated with the misrepresentation.  Even though we may have
rights   against   persons   and   entities   who   made  or  knew   about   the
misrepresentation,  such persons and entities are often  difficult to locate and
it is often  difficult to collect any monetary losses that we have suffered from
them.

Although we have  controls and  processes in place that are designed to identify
misrepresented  information in our loan origination operations, we cannot assure
you that we have detected or will detect all  misrepresented  information in our
loan  originations.  If we experience a significant number of such fraudulent or
negligent  acts,  our business,  financial  condition,  liquidity and results of
operations could be significantly harmed.

The inability to attract and retain qualified employees could significantly harm
our business.

We depend upon our loan officers to attract  borrowers,  by, among other things,
developing relationships with financial institutions,  other mortgage companies,
real estate agents,  borrowers and others.  We believe that these  relationships
lead to repeat and referral business.  The market for skilled executive officers
and loan officers is highly  competitive and historically has experienced a high
rate of  turnover.  In  addition,  if a manager  leaves our  company  there is a
likelihood  that other members of his or her team will follow.  Competition  for
qualified loan officers may lead to increased  hiring and retention  costs.  Our
inability to attract or retain a sufficient  number of skilled loan officers and
other key employees at manageable costs could harm our business.

If we do not manage our growth effectively,  our financial  performance could be
harmed.

We have  experienced  substantial  changes and rapid  growth that place  certain
pressures  on  our   management,   administrative,   operational  and  financial
infrastructure.  We expect to  continue  to  experience  this rapid  growth both
organically and through acquisitions. The increase in the size of our operations
may make it more difficult for us to ensure that we originate  quality loans. We
will need to attract and hire  additional  sales and management  personnel in an
intensely  competitive  hiring environment in order to preserve and increase our
market share. We will also need to effectively  integrate our  acquisitions.  At
the same time,  we will need to continue  to upgrade  and expand our  financial,
operational and managerial systems and controls, which could require capital and
human resources beyond what we currently have. We cannot assure you that we will
be able to meet our capital needs; expand our systems effectively;  allocate our
human resources optimally; identify and hire qualified employees; or effectively
integrate acquired businesses to achieve growth.

                                       10
<PAGE>





The  failure  to  manage  growth or  integrate  acquisitions  effectively  would
significantly harm our business,  financial condition,  liquidity and results of
operations.

An  interruption  in or breach of our  information  systems  may  result in lost
business.

We rely  heavily  upon  communications  and  information  systems to conduct our
business.  As we implement  our growth  strategy and increase the volume of loan
production,  that reliance will increase.  Any failure or interruption or breach
in security of our information systems or the third-party information systems on
which we rely could cause underwriting or other delays and could result in fewer
loan applications being received,  slower processing of applications and reduced
efficiency  in loan  servicing.  We  cannot  assure  you that such  failures  or
interruptions  will not occur or if they do occur  that they will be  adequately
addressed by us or the third  parties on which we rely.  The  occurrence  of any
failures or interruptions could significantly harm our business.

The success and growth of our business  will depend upon our ability to adapt to
and implement  technological  changes.

Our mortgage loan origination  business is currently  dependent upon our ability
to effectively interface with our brokers, borrowers and other third parties and
to efficiently  process loan applications and closings.  The origination process
is becoming more dependent upon technological  advancement,  such as the ability
to process applications over the Internet, accept electronic signatures, provide
process status updates instantly and other  customer-expected  conveniences that
are cost-efficient to our process. Implementing this new technology and becoming
proficient with it may also require significant capital  expenditures.  As these
requirements  increase  in the  future,  we will  have to  fully  develop  these
technological  capabilities  to  remain  competitive  or our  business  will  be
significantly harmed.

Our  financial  results  fluctuate as a result of  seasonality  and other timing
factors, which makes it difficult to predict our future performance.

Our business is generally  subject to seasonal trends.  These trends reflect the
general  pattern of housing  sales,  which  typically peak during the spring and
summer seasons.  Our quarterly operating results have fluctuated in the past and
are expected to  fluctuate  in the future,  reflecting  the  seasonality  of the
industry.

In the future,  our hedging  strategies  may not be successful in mitigating our
risks  associated with interest rates.

Although we do not currently use various  derivative  financial  instruments  to
provide a level of protection against interest rate risks, we may elect to do so
in the  future.  We  cannot  assure  you  that  our  hedging  strategy  and  the
derivatives  that we use  will  adequately  offset  the  risk of  interest  rate
volatility or that our hedging transactions will not result in losses.

                                       11

<PAGE>




We have incurred losses since inception.

As shown in the accompanying consolidated financial statements beginning on page
F-1, we have incurred  cumulative losses of $9,951 since inception.  At December
31, 2005, we had negative working capital of $1,550, negative tangible net worth
and a stockholders'  deficit of $1,657.  These factors raise  substantial  doubt
about our  ability to  continue  as a going  concern.  Our  continued  existence
depends on a number of  factors,  including  but not  limited to, our ability to
originate  loans, to secure  adequate  sources of capital and to locate and fund
acquisitions of suitable companies.  However,  there can be no assurance that we
will be able to continue as a going concern.

Risks  Associated with Our Acquisition  Strategy

There are risks associated with our acquisition strategy.

We intend  to  continue  to grow  through  acquisitions  of  financial  services
companies and small- to medium-sized mortgage brokers. We cannot predict whether
we  will  be  successful  in  pursuing  these   acquisitions  or  whether  these
acquisitions will provide us with positive operating results.

Consummation  of  each  acquisition  is  subject  to  various   representations,
warranties,  and  conditions,  such as securing the approval of state  licensing
bodies or the release of liens and other claims by creditors of the companies we
acquire.  Acquisitions may involve a number of specific risks including  adverse
short-term effects on our results of operations,  dilution from issuances of our
common stock and strain on our financial and administrative infrastructure.

Our  acquisition  strategy  involves  numerous  other  risks,   including  risks
associated with:

o    Identifying  acquisition  candidates and  negotiating  definitive  purchase
     agreements on satisfactory terms;

o    Our  financial  position  makes us less  attractive  to strong  acquisition
     candidates;

o    Conducting adequate due diligence with our limited resources;

o    Integrating operations, personnel and management information systems;

o    Managing a growing and geographically diverse group of employees;

o    Diverting  management's  attention  from  other  business  concerns;  and

o    Competition for attractive acquisition candidates from other acquirers.

We  cannot  be  certain  that we will be  able  to  successfully  integrate  our
acquisitions  or  manage  the  resulting  business  effectively,   or  that  any
acquisition  will achieve the benefits that we anticipate.  In addition,  we are
not certain that we will be able to acquire companies at attractive  valuations,
and, therefore, not highly dilutive to our existing shareholders. Depending upon
the nature, size and timing of potential future acquisitions, we may be required
to raise additional financing in order to consummate additional acquisitions. We
cannot assure you that our existing or future  financing  agreements will permit
the  necessary  additional  financing  or  that  additional  financing  will  be
available to us or, if available, that financing would be on terms acceptable to
management.

                                       12
<PAGE>

There are risks  associated with our plan to use our common stock as acquisition
consideration.

We expect to finance future acquisitions primarily through issuing shares of our
common stock for all or a portion of the  consideration to be paid. In the event
that our common stock does not maintain a sufficient  market value, or potential
acquisition  candidates  are  otherwise  unwilling to accept our common stock as
part of the consideration for the sale of their businesses, our ability to issue
common stock as acquisition consideration may be limited. In addition, currently
our stock is thinly  traded  on the  NASDAQ  OTC  Bulletin  Board.  This lack of
liquidity may discourage some  acquisition  candidates from accepting our common
stock as acquisition consideration.

Statutory and Regulatory Risks

The  multi-state  scope of our operations  exposes us to risks of  noncompliance
with an increasing and inconsistent  body of complex laws and regulations at the
federal, state and local levels.

We are  currently  licensed,  or exempt  from  licensing,  in one state and must
comply with the laws and  regulations,  as well as judicial  and  administrative
decisions, of these jurisdictions,  as well as an extensive body of federal laws
and  regulations.  The  volume  of new or  modified  laws  and  regulations  has
increased  in  recent  years.   The  laws  and  regulations  of  each  of  these
jurisdictions are different, complex and, in some cases, in direct conflict with
each other. As our operations  continue to grow to include other states,  it may
be more difficult to comprehensively  identify,  to accurately  interpret and to
properly program our technology systems and effectively train our personnel with
respect to all of these laws and regulations, thereby potentially increasing our
exposure  to the  risks  of  noncompliance  with  these  laws  and  regulations.
Increased regulation would result in increased compliance costs.

Our failure to comply with these laws can lead to civil and criminal  liability;
loss of our  licenses  and right to do  business in the  various  states;  class
action lawsuits; and administrative enforcement actions.

Several  federal,  state and local laws and regulations have been adopted or are
under  consideration   intended  to  eliminate  so-called   "predatory"  lending
practices.  Many of these laws and  regulations  impose  broad  restrictions  on
certain commonly  accepted lending  practices,  including some of our practices.
There can be no assurance that these proposed laws,  rules and  regulations,  or
other similar  laws,  rules or  regulations,  will not be adopted in the future.
Adoption of these laws and regulations  could have a material  adverse impact on
our business by substantially  increasing the costs of compliance with a variety
of inconsistent federal, state and local rules, or by restricting our ability to
charge rates and fees  adequate to compensate  us for the risk  associated  with
certain loans.

                                       13
<PAGE>





The  increased  governmental  scrutiny  of Fannie Mae and  Freddie  Mac may also
result in regulatory  changes and oversight  which may have an adverse impact on
the industry generally, and in turn have a negative effect on our business.

Stockholder  refusal to comply with regulatory  requirements  may interfere with
our ability to do business  in certain  states.

Some  states in which we  operate  may  impose  regulatory  requirements  on our
officers and directors and persons  holding certain amounts of our common stock,
usually 10% or more holders. If any of these persons fails to meet or refuses to
comply with a state's applicable regulatory requirements for licensing, we could
lose our authority to conduct business in that state.

We may be unable to compete  effectively  with financial  institutions  that are
exempt from certain state  restrictions.

Certain  federally  chartered  financial  institutions are exempt from the state
laws to which we are subject and may operate more effectively  under the federal
laws that govern their operations.  The increasing number of federal,  state and
local  "anti-predatory  lending"  laws may  restrict our ability to originate or
increase our risk of liability with respect to certain  mortgage loans and could
increase our cost of doing business.

The continued enactment of these laws, rules and regulations may prevent us from
making  certain  loans and may cause us to reduce the APR or the points and fees
on loans that we do make.  If nothing  else,  the growing  number of these laws,
rules  and  regulations  will  increase  our  cost of doing  business  as we are
required to develop  systems and procedures to ensure that we do not violate any
aspect of these new requirements.  Any of the foregoing could significantly harm
our business, financial condition, liquidity and results of operations.

The market price of our common  stock may be  materially  adversely  affected by
market volatility.

The market  price of our common  stock is expected to be highly  volatile,  both
because of actual and perceived  changes in our financial  results and prospects
and because of general  volatility in the stock  market.  The factors that could
cause fluctuations in our stock price may include, among other factors discussed
in this section, the following:

o    actual or  anticipated  variations in the number of housing starts or sales
     of existing homes;

o    changes in financial estimates by research analysts;

o    actual or  anticipated  changes  in the United  States  economy or the real
     estate or homebuilding environment;

o    announcements  by  us  or  our  competitors  of  significant  acquisitions,
     strategic   partnerships,    divestitures,    joint   ventures,   financing
     transactions, securities offerings or other strategic initiatives.

                                       14
<PAGE>





We have an open  comment  letter from the staff of the  Securities  and Exchange
Commission.

We  currently  have an open  comment  letter with the  Securities  and  Exchange
Commission  (see Item 1B below).  There is no guarantee that we will not have to
restate our previously  issued  financial  statements as a result of a review of
the issues  presented  in the  comment  letter.  Should we have to  restate  our
previously issued financial  statements,  the value of our common stock could be
severely affected.

We are controlled by a small group of  shareholders  whose  interests may differ
from other shareholders.

Affiliates of Consumer  Direct of America,  Inc. and our current  management are
among  our  largest  shareholders.  Accordingly,  they  will  continue  to  have
significant  influence in  determining  the outcome of all matters  submitted to
shareholders  for approval,  including the election of directors and significant
corporate transactions.  The interests of these shareholders may differ from the
interests of other  shareholders,  and their concentration of ownership may have
the effect of delaying or  preventing a change in control that may be favored by
other   shareholders.   As  long  as  these  people  are  among  our   principal
shareholders,  they will have the power to significantly  influence the election
of our entire Board of Directors.

The public  sale of our common  stock by selling  shareholders  could  adversely
affect the price of our common stock.

The market price of our common  stock could  decline as a result of market sales
by our shareholders,  including under our two resale registration statements, or
the  perception  that these  sales will  occur.  These  sales also might make it
difficult  for us to sell  equity  securities  in the  future at a time and at a
price that we deem appropriate.

There is relatively limited trading in our common stock.

The trading volume of our common stock is relatively limited, which we expect to
continue.   Therefore,  our  stock  may  be  subject  to  higher  volatility  or
illiquidity than would exist if our shares were traded more actively.

ITEM 1B.       UNRESOLVED STAFF COMMENTS.

We currently  have an open comment  letter in which the staff of the  Securities
and Exchange  Commission has inquired about certain  matters related to our Form
10-K for the fiscal  year ended  December  31,  2004,  and our Form 10-Q for the
quarter ended June 30, 2005. A summary of each matter under inquiry,  as well as
our position on the matter, is presented below.

                                       15
<PAGE>




The methods or assumptions  used in performing our impairment  analysis of PHF's
goodwill.

We test for impairment  annually or whenever  events or  circumstances  indicate
that the  carrying  amount  of the  asset  in  question  may not be  recoverable
including, but not limited to, a deterioration of profits for a business segment
that has  long-lived  assets,  and when other  changes  occur that might  impair
recovery of long-lived assets.

In our annual impairment review, we assume that the reporting unit with goodwill
will be held for ten years and sold at the end of the ten year period.  We start
with the expected earnings before interest, taxes, depreciation and amortization
("EBITDA") for the current year. We apply expected  probabilities to the EBITDA,
utilize one year variances of plus and minus 10% and a range of expected  growth
rates to arrive at the EBITDA  for each year  owned.  We also  assume a terminal
value based upon a multiple of EBITDA in the last year.  This  multiple is lower
than we currently expect to pay for a company of similar size. Next, we discount
the  annual  and  terminal  values to the  present  using an  assumed  risk free
interest rate to arrive at the fair value of the reporting  unit with  goodwill.
Finally,  we compare this fair value to the net carrying  value of the reporting
unit.  If the carrying  value of the reporting  unit exceeds its fair value,  we
proceed to a second step in the goodwill  impairment  test to measure the amount
of impairment loss.

Our presentation of cash flows from  discontinued  operations as a separate line
item in our statement of cash flows.

Previously,  we, like many  registrants,  had  presented the net cash flows from
discontinued operations as a single separate line in our consolidated statements
of cash flows.  In  accordance  with the December  2005  guidance  provided by a
member of the staff of the Securities and Exchange Commission,  we have modified
our  previously  reported  consolidated  statements of cash flows for our fiscal
years  2004  and  2003 to  separately  disclose  the  operating,  investing  and
financing portions of cash flows attributable to our discontinued operations. We
have also,  provided an  explanation  of this  modification  in the notes to our
financial  statements.  Under  this SEC  guidance,  this  modification  does not
require disclosure as a correction of an error.

The method used to value the stock issued in conjunction with our acquisition of
PGNF was not in  agreement  with the guidance  provided  from EITF 99-12 or SFAS
141.

In valuing the common stock we issued in our  acquisition  of PGNF,  we used the
closing price of our common stock on the day before  ($0.13 per share),  the day
of ($0.12 per share),  and the day after ($0.115 per share) the determination of
the number of shares to exchange was made.  The number of shares  exchanged with
PGNF was determined on October 14, 2002.  Our merger with PGNF was  subsequently
announced  on November  14, 2002 and our common  stock closed at $0.45 per share
that day.

                                       16
<PAGE>




In EITF 99-12,  the Task Force reached a consensus that "the market price of the
securities  over a  reasonable  period of time before and after the terms of the
acquisition  are agreed to and  announced."  Task Force members  stated that the
reasonable  period of time  referred to is intended to be very short,  such as a
few days  before  and after the  acquisition  is  agreed  to and  announced.  In
paragraph 22 of SFAS 141:  Business  Combinations  ("SFAS 141"), the FASB stated
that "the quoted market price of an equity  security issued to effect a business
combination  generally  should be used to estimate the fair value of an acquired
entity after  recognizing  possible  effects of price  fluctuations,  quantities
traded,  issue  costs,  and the like."  Further,  SFAS 141 states that the price
should be "the market  price for a reasonable  period  before and after the date
that  the  terms  of the  acquisition  are  agreed  to and  announced  shall  be
considered in determining  the fair value of securities  issued." With the price
of our common stock at $0.45 per share when the number of shares to be exchanged
was known and  announced,  the resulting  value would have far exceeded the fair
value of the net assets acquired,  including goodwill.  Therefore, we looked for
alternative  guidance  within SFAS 141.

Paragraph 23 of SFAS 141 states that if "the quoted market price is not the fair
value of the equity  securities,  either preferred or common,  the consideration
received  shall be estimated even though  measuring  directly the fair values of
net assets received is difficult."  Based upon this paragraph,  we evaluated the
net assets received,  including goodwill,  the quoted market price of our shares
to be issued, and other third party bids made to PGNF to determine the amount to
be recorded.

The SEC staff  questioned  our  support  for,  and  disclosures  of, the factors
considered  in our  determination  that a portion of the  recorded  deferred tax
assets was expected to be realized and requested an explanation of the nature of
the legal  restructurings  we plan to undertake to utilize  PFC's net  operating
losses.

Recognition  of deferred tax assets is based on  management's  belief that it is
more likely than not that the tax benefit associated with temporary  differences
and operating  loss  carryforwards  will be utilized.  A valuation  allowance is
recorded for those  deferred  income tax assets for which it is more likely than
not that the  realization  will not occur.  Through  December 31, 2002,  we were
considered to be in the  development  stage.  Due to the  uncertainty  of future
taxable  income  during  its  development  stage,  no future tax  benefits  were
recognized.

With the acquisitions  completed in 2003, we were no longer a development  stage
enterprise and deferred  income tax assets and  liabilities  were recognized for
the year ended  December  31, 2003.  While we  continued  to suffer  losses on a
consolidated basis in 2004 and 2005, our PHF subsidiary has remained  profitable
on a stand alone basis since we acquired it. Given PHF's  profitability,  in our
opinion,  we could undertake  certain actions that would allow us to utilize the
recognized deferred tax assets prior to their expiration.

                                       17
<PAGE>




First,  we would  discontinue  filing our periodic and other reports as required
under the securities laws. These compliance  costs, and the associated  salaries
of the people  responsible  for the  preparation  of these  regulatory  reports,
represent the majority of the costs incurred in our corporate operation.

Second,  we would convert PHF from a Florida  corporation  to a Florida  limited
liability  company.  By doing so, PHF would no longer be taxed as a stand  alone
corporation  but rather as a  partnership  with its income  flowing into our tax
return.  PHF's  income  would  exceed the costs we incur  resulting in us having
taxable income.  Then, we would use the deferred tax assets recognized to offset
the tax due on the return.

Based upon PHF's historical  profitability  and what would be the  substantially
reduced  corporate  expenses,  it is more  likely than not that we would use the
unreserved  deferred tax assets  prior to the  expiration  of the net  operating
losses under current law.

ITEM 2. PROPERTIES.

Our executive  office is located at 6330 S. Sandhill  Road,  Las Vegas,  Nevada.
There, we lease  approximately  10,580 square feet and have monthly  payments of
$10,  with  additional  monthly  expense of $2  incurred  for such  expenses  as
building maintenance.

Our PHF  subsidiary  occupies  approximately  2,500  square  feet  in  Maitland,
Florida, under a lease expiring March 31, 2006. The annual rent on our office in
Maitland, Florida, is $93, with an escalator clause based on CPI.

We also have 23 branch  offices of which all are leased.  The branch offices are
leased properties of varying types.  Lease periods are typically  twenty-four to
thirty-six  months  in  length.  The  average  lease  payment  is  approximately
fifteen-hundred dollars per month per office.

We continue to evaluate the suitability and adequacy of all of our branch office
locations and have active  programs of relocating or closing any as necessary to
maintain efficient and attractive facilities.  We believe our present facilities
are adequate for our operating purposes.

ITEM 3.          LEGAL PROCEEDINGS.

In mid-2001,  the Company, and certain of its former directors and officers were
named as  defendants  in class  action  complaints  alleging  violations  of the
federal  securities  laws in the United States  District  Court for the Southern
District of New York.  In  mid-2002,  the  complaints  against the Company  were
consolidated into a single action.

                                       18

<PAGE>




The essence of the complaint is that, in connection  with the Company's  initial
public  offering in October 1999  ("IPO"),  the  defendants  issued and sold the
Company's  common  stock  pursuant  to a  registration  statement  which did not
disclose to investors  that certain  underwriters  in the offering had solicited
and received  excessive  and  undisclosed  commissions  from  certain  investors
acquiring the Company's  common stock in connection  with the IPO. The complaint
also  alleges  that the  registration  statement  failed  to  disclose  that the
underwriters   allocated   Company  shares  in  the  IPO  to  customers  of  the
underwriters  in exchange  for the  customers'  promises to purchase  additional
shares in the  aftermarket  at  pre-determined  prices above the IPO price.  The
action seeks damages in an unspecified amount.

The action is being  coordinated with  approximately  300 other nearly identical
actions filed  against  other  companies  that had initial  public  offerings of
securities between the 1997 and 2000 time periods.

The Company  has  approved a  Memorandum  of  Understanding  ("MOU") and related
agreements  which set forth the terms of a settlement  between the Company,  the
plaintiff  class and the vast  majority  of the other  approximately  300 issuer
defendants.  Among other  provisions,  the  settlement  contemplated  by the MOU
provides  for a release of the Company  and the  individual  defendants  for the
conduct  alleged  in the  action to be  wrongful.  The  Company  would  agree to
undertake  certain  responsibilities,  including  agreeing to assign  away,  not
assert,  or release  certain  potential  claims the Company may have against its
underwriters.

It is  anticipated  that any  potential  financial  obligation of the Company to
plaintiffs  pursuant  to the  terms of the MOU and  related  agreements  will be
covered by existing insurance.  Therefore,  the Company does not expect that the
settlement  will  involve  any  payment  by the  Company.  The MOU  and  related
agreements are subject to a number of  contingencies,  including the negotiation
of a settlement agreement and its approval by the Court.

The Court will hold a Settlement  Fairness  Hearing at 10:00 a.m.,  on April 24,
2006, at the United States District Court for the Southern District of New York,
500 Pearl Street,  New York,  New York 10007.  At this  hearing,  the Court will
consider whether the Settlement is fair,  reasonable and adequate.  If there are
objections,  the Court will  consider  them.  After the hearing,  the Court will
decide whether or not to approve the  Settlement.  We cannot opine as to whether
or when a settlement  will occur or be finalized,  or whether the  settlement is
ultimately  approved.  We continue to believe the resolution of this matter will
not have a material adverse effect on the Company.

We are also party to  various  legal  proceedings  arising  out of the  ordinary
course of our business.  Management  believes that any liability with respect to
these legal actions,  individually or in the aggregate, will not have a material
adverse effect on our consolidated financial position and results of operations.

ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters  submitted to a vote of security holders during the fourth
quarter of 2005.

                                       19
<PAGE>





                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common stock trades in the over-the-counter  market and is quoted on the OTC
Bulletin  Board  under  the  symbol  PGNFE.OB.  As of  March  31,  2006,  we had
269,133,486 shares of common stock issued and outstanding, respectively.

The following table sets forth, for the periods indicated,  the high and low bid
prices per share of our common stock as quoted on the OTC Bulletin Board.

<TABLE>
<CAPTION>
<S>                                                                 <C>            <C>

                                                                    High           Low
                                                                    ----           ---
                                       2006

                1st Quarter through March 23, 2006                  $0.08          $0.03

                                       2005
                4th Quarter                                         $0.16          $0.02
                3rd Quarter                                         $0.06          $0.03
                2nd Quarter                                         $0.08          $0.04
                1st Quarter                                         $0.09          $0.03

                                       2004
                4th Quarter                                         $0.17          $0.04
                3rd Quarter                                         $0.15          $0.04
                2nd Quarter                                         $0.14          $0.04
                1st Quarter                                         $0.34          $0.10

                                       2003
                4th Quarter                                         $0.52          $0.15
                3rd Quarter                                         $0.62          $0.44
                2nd Quarter                                         $0.75          $0.45
                1st Quarter                                         $0.80          $0.40
</TABLE>

Holders

As of March 31, 2006, we had  approximately  328  stockholders  of record.  Only
record  holders of shares held in "nominee" or street names are included in this
number.

Dividends

We have never declared or paid cash dividends on our common stock.  We intend to
retain  future  earnings,  if any,  for use in the  operations  of our  business
including working capital,  repayment of indebtedness,  capital expenditures and
general corporate purposes.
 We do not  anticipate  paying any cash  dividends  on our  common  stock in the
foreseeable future.

                                       20
<PAGE>





Equity Compensation Plan Information

Information regarding our equity compensation plans,  including both stockholder
approved plans and non-stockholder approved plans, is included in Item 12.

Recent Sales of Unregistered Securities

On November 7, 2005, we issued 650,000  restricted shares to a consultant valued
at $33, or approximately  $0.05 per share.  These shares vest ratably over three
years.

On December  20,  2005,  we entered  into an  Exchange  Agreement  with  Matthew
Robinson  ("Robinson"),  in  which  Robinson  exchanged  two  promissory  notes,
totaling  approximately  $1,643 in aggregate  outstanding  principal  amount and
accrued and unpaid interest as of December 20, 2005,  into 15,000,000  shares of
our common stock,  or  approximately  $0.11 per share. On December 20, 2005, the
closing price as quoted on the OTC Bulletin Board was $0.05 per share.

On December  31, 2005,  we sold  333,333  shares of our common stock for $10, or
approximately $0.03 per share, to an accredited investor.

ITEM 6.          SELECTED FINANCIAL DATA.

The table below sets forth a summary of our results of operations  and financial
condition  as of and for the periods then ended for our  continuing  operations.
This  information  has been  derived  from our  audited  consolidated  financial
statements  contained  elsewhere in this report.  Such selected  financial  data
should be read in  conjunction  with those  financial  statements  and the notes
thereto and with  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" also included elsewhere herein.

<TABLE>
<CAPTION>
<S>                                        <C>             <C>             <C>              <C>             <C>
                                                                                                          Inception
                                                   2005            2004           2003            2002    to 12/31/01
                                                   ----            ----           ----            ----    -----------
Statement of operations data:
  Total revenues                           $      1,502    $      2,034    $      1,964     $          -    $        -
  Total operating expenses                 $      2,329    $      3,712    $      4,066     $      2,337    $      225
  Interest expense                         $        167    $        107    $        415     $          5    $        -
  Loss from continuing operations          $        (90)   $     (2,358)   $     (1,680)    $     (2,342)   $     (225)
  Net loss                                 $        (90)   $     (5,897)   $     (1,397)    $     (2,342)   $     (225)
  Basic and diluted loss per share:
    From continuing operations             $      (0.00)   $      (0.03)   $      (0.01)    $      (0.04)   $    (0.01)
    Net loss per common share              $      (0.00)   $      (0.04)   $      (0.01)    $      (0.04)   $    (0.01)

</TABLE>

                                       21
<PAGE>
<TABLE>
<CAPTION>
<S>                                         <C>             <C>            <C>             <C>               <C>




                                                                        As of December 31,
                                                                        ------------------
                                              2005            2004            2003            2002             2001
                                              ----            ----            ----            ----             ----
Balance sheet data:
   Total assets                             $     173       $     257      $   35,662      $      206        $       -
   Total liabilities                        $   1,830       $   3,205      $   27,686      $    1,074        $     197
    Stockholders' (deficit) equity          $  (1,657)      $  (2,948)     $    7,976      $     (868)       $    (197)
    Tangible net worth                      $  (1,657)      $  (2,948)     $     (660)     $     (868)       $    (197)

</TABLE>

As mentioned  elsewhere,  prior to our  acquisitions  of PGNF and PHF, we were a
development  stage  enterprise  and  had  no  revenues.

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following  discussion and analysis of our financial condition and results of
operations  should  be read  in  conjunction  with  our  consolidated  financial
statements and related notes contained elsewhere herein.

General

We are  headquartered in Las Vegas,  Nevada and were incorporated in Delaware in
August 1999. We are a financial  services  company focused on the acquisition of
mortgage brokers in the one-to-four family residential mortgage market and other
financial services companies. Prior to our acquisition of Shearson, we conducted
business in the state of Florida.

Overview

Our business  relies on our ability to originate  mortgage loans at a reasonable
cost. The mortgage  industry is generally  subject to seasonal trends,  and loan
origination  volumes in our industry have  historically  fluctuated from year to
year and are  affected by such  external  factors as home  values,  the level of
consumer  debt and the  overall  condition  of the  economy.  In  addition,  the
premiums we receive  from the  secondary  market for our loans have  fluctuated,
also influenced by the overall  condition of the economy and, more  importantly,
the interest rate environment. As a consequence, the business of originating and
selling loans is cyclical.


                                       22
<PAGE>




Critical Accounting Policies

We have established  various accounting policies which govern the application of
accounting  principles generally accepted in the United States of America in the
preparation of our financial statements.  Certain accounting policies require us
to make significant estimates and assumptions that may have a material impact on
certain  assets  and  liabilities,  as well  as our  operating  results,  and we
consider these to be critical accounting policies. The estimates and assumptions
we use are based on historical  experience and other factors which we believe to
be reasonable under the circumstances. Actual results, particularly the carrying
value of goodwill, losses from discontinued operations,  the gain on exchange of
debt for equity, and the realization of deferred income tax assets, could differ
materially  from these  estimates and  assumptions,  which could have a material
impact on the  carrying  value of assets  and  liabilities  and our  results  of
operations.

We believe the following are critical  accounting policies that require the most
significant  estimates and assumptions that are subject to significant change in
the preparation of our consolidated financial statements:

Origination Fees

Origination  fees are  comprised  of points and other fees  charged on  mortgage
loans  originated  by our loan  officers  and brokered  through  other banks and
financial  institutions.  Points and fees are primarily a function of the volume
of mortgage  loans  originated by our loan officers.  We recognize  revenue from
origination fees when a loan is closed.

Loan Origination Costs

We also measure and monitor the cost to originate our loans.  Such costs include
credit reporting costs,  appraisal fees, and other loan-related expenses, net of
reimbursement we receive from borrowers.

Income Taxes

We file a consolidated  federal income and combined state franchise tax returns.
We utilize the asset and liability method of accounting for income taxes,  under
which  deferred  income  taxes are  recognized  for the future tax  consequences
attributable  to the  differences  between  the  financial  statement  values of
existing  assets and  liabilities  and their  respective  tax bases.  We measure
deferred tax assets and  liabilities  using enacted tax rates we expect to apply
to taxable income in the years in which those temporary differences are expected
to be  recovered  or settled.  We  recognize  the effect on deferred  taxes of a
change in tax rates in income in the period that includes the enactment date.

In  determining  the possible  realization  of deferred tax assets,  we consider
future  taxable income from the following  sources:  (a) the reversal of taxable
temporary  differences,  (b) future operations  exclusive of reversing temporary
differences,  and (c) tax  planning  strategies  that,  if  necessary,  would be
implemented  to  accelerate  taxable  income into periods in which net operating
losses might otherwise expire.

                                       23
<PAGE>





Gain on Exchange of Debt for Equity

We accounted for the exchange of certain  outstanding debt as an  extinguishment
of debt and recorded a gain  pursuant to APB 26 and recorded a gain equal to the
difference  between the face value of the debt  instruments and the value of the
equity securities issued for the debt instruments.

Prior to SFAS 145, material gains and losses from the extinguishment of debt and
troubled debt  restructurings  were  required to be classified as  extraordinary
pursuant to APB 30. Under SFAS 145,  the material  gains and losses are reported
as extraordinary only if the event creating the gain or loss is both unusual and
infrequent in occurrence.  The exchange of debt for equity is clearly  unrelated
to the typical activities of our business,  and hence, the transaction should be
considered unusual in nature. But, we do not consider the exchange of equity for
debt to be  infrequent  as we  continue  settling  our debts  for  equity in all
situations where our creditors agree to such an exchange.

Discontinued Operations

In accordance  with SFAS No. 144,  Accounting  for the Impairment or Disposal of
Long-Lived  Assets  (SFAS  144),  a  component  classified  as held  for sale is
reported in discontinued  operations when the following  conditions are met: (a)
the operations and cash flows of the component have been (or will be) eliminated
from  the  ongoing  operations  of  the  entity  as a  result  of  the  disposal
transaction  and (b)  the  entity  will  not  have  any  significant  continuing
involvement in the operations of the component  after the disposal  transaction.
In a period in which a component of an entity  either has been disposed of or is
classified as held for sale, the income  statement for current and prior periods
reports the results of operations of the  component,  including any gain or loss
recognized in accordance with SFAS 144 paragraph 37, in discontinued operations.
The results of discontinued  operations,  less applicable  income tax (benefit),
are reported as a separate  component of income before  extraordinary  items and
the  cumulative  effect of accounting  changes (if  applicable).  The assets and
liabilities  of a  disposal  group  classified  as held  for  sale is  presented
separately in the asset and liability sections,  respectively,  of the statement
of financial position.

                                       24
<PAGE>




Results of Operations

The  following  table sets forth our results of  operations  as a percentage  of
total  revenues for our  continuing  operations for the years ended December 31,
2005, 2004 and 2003:

<TABLE>
<CAPTION>
<S>                                                    <C>             <C>               <C>

                                                           2005                2004              2003
                                                           ----                ----              ----
              Revenue:
                  Loan origination fees                      100.0%          100.0%            100.0%
                                                       -------------   -------------     -------------
                         Total revenue                       100.0%          100.0%            100.0%
              Expenses:
                  Salaries, commissions, and benefits         96.3%           94.2%            128.2%
                  Loan production costs                        1.3%            4.5%              5.2%
                  General and administrative expenses         52.2%           42.2%             56.7%

                  Impairment of goodwill                        -             40.4%               -
                  Non-recurring charges                        5.3%            1.2%             17.0%
                                                       -------------   -------------     -------------
                         Total expenses                      155.1%          182.5%            207.1%

              Operating loss                                 (55.1)%         (82.5)%          (107.1)%

              Other income (expense):
                   Gain on exchange of debt for equity        59.5%             -                -
                   Interest expense, net                     (11.1)%         (5.3)%           (21.1)%
                   Loss on disposal of assets                   -            (0.7)%              -
                   Loss on disposal of segment                  -            (5.0)%              -
                                                       -------------   ----------------- -------------

              Loss from continuing operations before
                 provision (benefit) for income taxes        (6.7)%          (93.5%)        (128.2%)
              Provision (benefit) for income taxes           (0.7)%           22.4%          (42.7%)
                                                       -------------   ----------------- -------------

              Net loss from continuing operations            (6.0)%         (115.9%)         (85.5%)
                                                       =============   =============     =============

</TABLE>

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Loan  Originations:  We originated  $78.2 million in mortgage loans for the year
ended December 31, 2005 ("fiscal  2005")  compared to $86.4 million for the year
ended December 31, 2004 ("fiscal 2004").  The decrease in loan  originations was
due primarily to the  contracting  marketplace for home mortgage loans in fiscal
2005 as compared  to fiscal  2004 as well as a  reduction  in the number of loan
originators  working for our PHF subsidiary in fiscal 2005 as compared to fiscal
2004.

                                       25
<PAGE>




Revenues

Revenue from loan closings. Revenue from loan closings decreased $532, or 26.2%,
to $1,502 for the year ended  December 31, 2005  compared to $2,034 for the year
ended December 31, 2004.  These fees represent  points and other fees charged on
mortgage  loans  originated by our loan  officers.  The decrease in revenue from
loan closings was due primarily to a 20.6% reduction in the average revenue from
each  closed  loan in fiscal  2005 as  compared to fiscal 2004 as well as a 7.0%
reduction  in the number of closed  loans in fiscal  2005 as  compared to fiscal
2004.

Operating Expenses

Salaries, commissions and benefits. Salaries, commissions and benefits decreased
$470,  or 24.5%,  to $1,446 for the year ended  December  31,  2005  compared to
$1,916 for the year ended December 31, 2004.  This decrease was primarily due to
a $236 reduction in salaries and non-cash  compensation at our corporate offices
in  fiscal  2005 as  compared  to  fiscal  2004 as well as  reduced  commissions
associated with fewer closed loans in fiscal 2005 as compared to fiscal 2004.

Loan production costs. Loan production costs decreased $71, or 78.0%, to $20 for
the year ended December 31, 2005 compared to $91 for the year ended December 31,
2004. This decrease was due primarily to the reduction in the number of mortgage
loans originated at our PHF subsidiary in fiscal 2005 compared to fiscal 2004.

General  and  administrative  expenses.   General  and  administrative  expenses
decreased $75, or 8.7%, to $783 for the year ended December 31, 2005 compared to
$858 for the year ended  December 31, 2004.  This  decrease was primarily due to
reduced  operating  expenses at our PHF  subsidiary  in fiscal 2005  compared to
fiscal 2004.

Non-recurring expenses.  Non-recurring expenses increased $55, or 220.0%, to $80
for the year ended December 31, 2005 compared to $25 for the year ended December
31,  2004.  In  fiscal  2005,  non-recurring  expenses  consisted  of fees to an
investment  banker  and  stock  issued  as part of our  rescission  of our stock
purchase  agreement  with First  Charleston  Mortgage  LLC. In fiscal 2004,  the
non-recurring  expenses  relate to payments  made for  investment  banking  fees
related to an unsuccessful financing effort.

Operating  loss.  The operating  loss decreased by $851, or 51%, to $827 for the
year ended  December 31, 2005 compared to $1,678 for the year ended December 31,
2004. This decrease was due primarily to factors discussed above.

Interest expense. Interest expense increased $60, or 56.1%, to $167 for the year
ended  December 31, 2005 compared to $107 for the year ended  December 31, 2004.
This  increase was due  primarily to the higher debt level  associated  with our
sale of PGNF to its former owner.  This debt was  outstanding  for all of fiscal
2005 and only seven months in fiscal 2004.

                                       26
<PAGE>





Provision  (benefit) for income taxes. The provision  (benefit) for income taxes
decreased $466 to a benefit of $10 for the year ended December 31, 2005 compared
to an expense of $456 for the year ended  December 31, 2004.  This  decrease was
principally due to the additional expense of $414 recognized in 2004 to increase
the deferred  tax  valuation  allowance,  which  reduced the  carrying  value of
deferred tax assets to $-0-.

Net loss from continuing  operations.  The net loss from  continuing  operations
decreased $2,268, or 96.2%, to $90 for the year ended December 31, 2005 compared
to $2,358 for the year ended December 31, 2004.

Net loss. The net loss  decreased  $5,807,  or 98.5%,  to $90 for the year ended
December 31, 2005 compared to $5,897 for the year ended December 31, 2004.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Loan  Originations:  We originated  $86.4 million in mortgage loans for the year
ended  December 31, 2004 compared to $79.9  million for the year ended  December
31,  2003.  This  increase in loan  originations  was due  primarily to the loan
originations  in 2003  representing  only the  eleven  months  we owned  our PHF
subsidiary.

Revenues

Revenue from loan closings.  Revenue from loan closings  increased $70, or 3.6%,
to $2,034 for the year ended  December 31, 2004  compared to $1,964 for the year
ended December 31, 2003.  These fees represent  points and other fees charged on
mortgage loans  originated by our loan  officers.  This increase in revenue from
loan  closings  is due  primarily  to the  revenue  from loan  closings  in 2003
representing  only the eleven months we owned our PHF  subsidiary.  Expressed in
terms as revenue per loan,  our revenues per loan  increased  $0.3,  or 9.4%, to
$3.9 per loan for the year ended December 31, 2004 compared to $3.6 per loan for
the year ended December 31, 2003.

Operating Expenses

Salaries, commissions and benefits. Salaries, commissions and benefits decreased
$601,  or 23.9%,  to $1,916 for the year ended  December  31,  2004  compared to
$2,517 for the year ended December 31, 2003.  This decrease was primarily due to
a reduction in salaries at our corporate  offices in the year ended December 31,
2004 compared to the year ended December 31, 2003.

Loan production costs. Loan production costs decreased $12, or 11.7%, to $91 for
the year ended  December 31, 2004  compared to $103 for the year ended  December
31, 2003. This decrease was due primarily to the higher pull through rate at our
PHF subsidiary and reductions in costs associated with originating  loans in the
year ended December 31, 2004 compared to December 31, 2003.

                                       27
<PAGE>





General  and  administrative  expenses.   General  and  administrative  expenses
decreased  $255, or 22.9%, to $858 for the year ended December 31, 2004 compared
to $1,113 for the year ended December 31, 2003.  This decrease was primarily due
to reduced  operating  expenses  resulting at our corporate  headquarters in the
year ended December 31, 2004 compared to the year ended December 31, 2003.

Impairment  of  goodwill.  Subsequent  to the years ended  December 31, 2005 and
2004, we recognized an impairment charge of $822 in connection with the value of
goodwill. After the impairment charge, goodwill had a remaining book value of $0
(see Note 17 of Notes to the Consolidated Financial Statements).

Non-recurring  expenses.  Non-recurring expenses decreased by $308, or 92.5%, to
$25 for the year ended  December  31,  2004  compared to $333 for the year ended
December 31, 2003.  For the year ended  December  31,  2004,  the  non-recurring
expenses  relate to payments  made for  investment  banking  fees  related to an
unsuccessful  financing  effort.  For the year  ended  December  31,  2003,  the
non-recurring expenses relate to severance for our former CEO and for investment
banking fees and travel related to an unsuccessful financing effort.

Operating  loss. The operating  loss decreased by $424, or 20.2%,  to $1,678 for
the year ended  December 31, 2004 compared to $2,102 for the year ended December
31, 2003. This decrease was due primarily to factors discussed above.

Interest  expense.  Interest  expense  decreased $308, or 74.2%, to $107 for the
year ended  December 31, 2004  compared to $415 for the year ended  December 31,
2003.  This decrease was due primarily to the beneficial  conversion  feature of
our convertible  debentures  being  amortized into interest  expense in the year
ended December 31, 2003.

Loss on sale of  assets.  Loss on the sale of assets  was $15 for the year ended
December  31,  2004.  This  loss  related  to the sale of office  furniture  and
fixtures at our former  corporate office location as part of a settlement of our
lease obligation with the landlord.

Loss on disposal of segment.  Loss on the disposal of PGNF was $102 for the year
ended  December  31, 2004.  This  represents  the  non-cash  loss we incurred in
disposing of PGNF.

Provision  (benefit) for income taxes. The provision  (benefit) for income taxes
increased  $1,293 to an  expense of $456 for the year ended  December  31,  2004
compared  to a benefit of $(837)  for the year ended  December  31,  2003.  This
increase  was  primarily  due to  state  income  taxes  applicable  to  our  PHF
subsidiary  in 2004 which were not offset by our loss at our  corporate  office,
and the  recognition of an increase of $708 in the deferred tax asset  valuation
allowance.

Net loss from continuing  operations.  The net loss from  continuing  operations
increased  by $678,  or 40.4%,  to $2,358 for the year ended  December  31, 2004
compared to $1,680 for the year ended  December  31,  2003.  This  increase  was
primarily due to $822 in impairment expense offset by the decreases in expenses,
and increased deferred taxes, as discussed above.

                                       28
<PAGE>





Loss  from  discontinued  operations.  The  loss  from  discontinued  operations
increased  $3,822,  or 1,350.5%,  to $3,539 for the year ended December 31, 2004
compared  to income  from  discontinued  operations  of $283 for the year  ended
December 31, 2003. This decrease  relates  primarily to an impairment  charge of
$2,582 on the goodwill  associated  with the acquisition of PGNF incurred in the
year ended December 31, 2004.

Net loss. The net loss increased $4,500, or 322.1%, to $5,897 for the year ended
December 31, 2004 compared to $1,397 for the year ended December 31, 2003.  This
increase was due to the factors discussed above.

Quarterly Results and Restatement

Set forth below is certain restated unaudited  quarterly financial data for each
of our last three fiscal years.  The information has been derived from unaudited
financial statements that, in the opinion of management, include all adjustments
(consisting  only of normal recurring  adjustments)  necessary to fairly present
such quarterly  information in accordance  with  generally  accepted  accounting
principles. The operating results for any quarter are not necessarily indicative
of the results to be expected for any future period.

As noted  elsewhere in this Annual  Report on Form 10-K, we rescinded our member
purchase  agreement with the former members of First  Charleston  Mortgage,  LLC
("FCM").  The unaudited quarterly financial data below for the first, second and
third  quarters in the twelve months ended  December 31, 2005 have been restated
to reflect the rescission of the FCM agreement.


                                       29
<PAGE>
<TABLE>
<CAPTION>
<S>                                 <C>           <C>          <C>           <C>





                                         Year Ended December 31, 2005 (Unaudited)
                                          (in thousands, except per share amount)

                                       First        Second        Third       Fourth
                                      Quarter       Quarter      Quarter      Quarter
                                      -------       -------      -------      ------
Revenue                             $     249     $    383     $    479      $   391
Total operating expenses            $     452     $    497     $    638      $   742
Operating loss                      $    (203)    $   (114)    $   (159)     $  (351)
Interest expense                    $      48     $     46     $     46      $    27
Other income                        $       -     $      -     $      -      $   894
Net loss                            $    (251)    $   (160)    $   (205)     $   526
Basic and diluted income (loss)
     per share                      $   (0.00)    $  (0.00)    $  (0.00)     $  0.01

                                         Year Ended December 31, 2004 (Unaudited)
                                          (in thousands, except per share amount)

                                       First        Second        Third       Fourth
                                      Quarter       Quarter      Quarter      Quarter
                                      -------       -------      -------      -------
Revenue                             $     582     $     637    $    479     $    336
Total operating expenses            $   1,043     $     816    $    549     $  1,304
Interest expense                    $      18     $      25    $     41     $     23
Loss on disposal of segment         $       -     $     102    $      -     $     15
Loss from continuing operations     $    (479)    $    (306)   $   (111)    $ (1,462)
Net loss                            $  (3,352)    $    (972)   $   (111)    $ (1,462)
Basic and diluted loss per share    $   (0.03)    $   (0.01)   $  (0.00)    $  (0.03)

                                         Year Ended December 31, 2003 (Unaudited)
                                          (in thousands, except per share amount)

                                       First        Second        Third       Fourth
                                      Quarter       Quarter      Quarter      Quarter
                                      -------       -------      -------      -------
Revenue                             $     270      $    545    $    656     $    493
Total operating expenses            $     571      $  1,072    $  1,031     $  1,392
Interest expense                    $     109      $    100    $    104     $    102
Loss from continuing  operations    $    (410)     $   (627)   $   (479)    $ (1,001)
Net loss                            $    (923)     $   (281)   $    (84)    $   (109)
Basic and diluted  loss per share   $   (0.01)     $  (0.00)   $  (0.00)    $  (0.00)
</TABLE>

Liquidity and Capital Resources

Our primary  source of  liquidity  is from fees earned by  originating  mortgage
loans. Our mortgage  origination  operations require continued access to cash to
fund ongoing  administrative,  operating,  and tax expenses as well as providing
cash to fund our corporate  operations.  Our corporate operations require access
to cash to fund ongoing  administrative  expenses,  our acquisition program, tax
expenses  as  well  as  interest  and  principal  payments  under  our  existing
indebtedness.

                                       30
<PAGE>





We had cash and cash equivalents of  approximately  $80 at December 31, 2005 and
fees receivable of $38 with which to satisfy our ongoing  mortgage and corporate
operation's  current  liabilities of $1,668.  We deemed this liquidity  level as
insufficient  to accomplish our goals and meet our liquidity  needs for 2006. We
continue to seek ways to improve our liquidity including finding merger partners
with stronger  working  capital  positions  than we have. We continue to explore
ways to  raise  equity  or debt  capital,  reduce  our  operating  expenses  and
renegotiate the terms of our existing indebtedness,  and decrease our insolvency
risk,  but  there  can be no  assurance  that  we will be  successful  in  these
endeavors or that we will continue as a going concern.

In fiscal 2005,  we used $516 of cash in operating  activities  for our mortgage
and corporate  operations and purchased  equipment of approximately  $10. During
fiscal 2005, our accounts payable,  accrued  expenses,  and income taxes payable
increased by $376, primarily at the corporate level.

Credit Facility.  On September 24, 2004, the Company defaulted on its promissory
note dated June 4, 2003 to Bank of America,  N.A.  ("BoA") being unable to repay
this note in full when demanded to do so by BoA. BoA has commenced  legal action
against us and other guarantors of the  indebtedness for repayment.  On December
13,  2004,  we entered  into a  standstill  agreement  with BoA  whereby,  for a
principal reduction payment of $25 and the payment of an extension fee and BoA's
legal fees,  the maturity date of the note was extended to December 1, 2005, the
interest  rate was  increased  to the bank's  prime  rate plus 4%, and  required
principal  reduction  payments  of $5 per month  through  November  1, 2005.  On
January  27,  2006,  we entered  into a second  standstill  agreement  with BoA,
effective  December  1, 2005,  wherein we paid a loan  extension  fee of $20 and
BoA's legal fees.  The  maturity  of the note was  extended to May 1, 2006,  the
interest  rate was increased to the bank's prime rate plus 5%, and the principal
reduction  fees were  increased to $10 per month through April 1, 2006. On March
1, 2006, we defaulted on the terms of the second standstill  agreement with BoA,
and this loan remains in default.

Convertible debentures. On March 6, 2003, we completed a private offering of 379
units  consisting of (i) a $1 convertible  promissory note due December 31, 2003
with interest  payable  quarterly at a stated interest rate of 15% per annum and
(ii) a warrant to  purchase  shares of common  stock,  exercisable  at $0.25 per
share,  for each $5.00 in principal of the  promissory  note issued in the unit.
The holder  has the right to convert  the  outstanding  principal  amount of the
convertible  promissory  note (or any portion  thereof),  together  with accrued
interest thereon, into shares of our common stock at a conversion price of $0.25
per share,  subject to standard  anti-dilution  adjustments  as specified in the
note. On December 31, 2004, holders of our 15% convertible notes agreed to amend
the maturity date of the  convertible  notes to December 31, 2006 and reduce the
interest rate on the debentures to 10% in  consideration  for a reduction in the
strike price of the warrants to $0.05 per share.  The convertible  notes require
payments of interest on a quarterly basis. We currently are in default under the
terms of these notes.

                                       31
<PAGE>




Capital  Transaction.  In fiscal 2005 and 2004, we raised an additional $352 and
$178, respectively, from an equity offering completed on February 28, 2005. This
private placement financing  transaction (the "Offering")  consisted of the sale
17,207,792  units (at $0.0308 per unit) to several  accredited  investors for an
aggregate  purchase  price of $530.  Each unit  consisted of one share of common
stock,  par value  $0.0001 per share (the  "Common  Stock"),  and one warrant to
purchase one share of Common  Stock at $0.04 per share  expiring on December 31,
2007.

In December  2005,  we completed an offering of  convertible  notes and warrants
whereby  we  raised a total  $201 of which  $19 was  allocated  to a  beneficial
conversion  feature and $23 was allocated to the value of the warrants.  In this
private placement financing transaction, we issued convertible notes with a face
value of $201 and warrants to purchase 1,226,000 shares of our common stock. The
notes are  convertible  into  4,580,000  shares  of our  common  stock,  bear an
interest rate of 12% per annum,  require  semi-annual  interest payments and are
due December 31, 2007.  The  warrants  issued have  exercise  prices of $0.04 to
$0.05 per share and expire December 31, 2007.

On February 2, 2006, we completed a private placement  financing  transaction to
an  accredited  investor in order to have the capital  necessary to complete the
SHL  acquisition.  Pursuant to this  private  placement  transaction,  we issued
2,625,000  units at $0.04 per unit for an aggregate of $105. Each unit consisted
of one share of our common  stock,  par value  $0.0001  per share  (the  "Common
Stock"),  and one warrant to purchase one share of our Common Stock at $0.06 per
share expiring on February 1, 2008.

Acquisitions  and  Rescission of  Agreements:  On February 7, 2006, we agreed to
exercise  the  termination  provisions  contained  in  Section  11(a)(i)  of the
Purchase  Agreement  entered  into on January 19, 2005 with the Members of First
Charleston Mortgage, LLC. Pursuant to this agreement, we returned to the Members
all of the membership  interests in First Charleston  Mortgage,  LLC in exchange
for the return of 3,500,785  shares of our common  stock,  par value $0.0001 per
share. For accounting  convenience,  this agreement is effective at the close of
business on December 31, 2005.

On February 7, 2006, we agreed to acquire  Shearson  Home Loans,  Inc., a Nevada
corporation ("SHL"), from Consumer Direct of America, Inc. ("CDA"),  pursuant to
the terms and  conditions of a Share Exchange  Agreement  dated February 7, 2006
(the "SHL Agreement")  among CDA, SHL and us. Pursuant to the SHL Agreement,  we
acquired  all of the common  stock of SHL for  149,558,791  shares of our common
stock  and  79  shares  of  our  Series  F  Preferred  Stock  (convertible  into
443,217,018 shares of our Common Stock),  valued at approximately  $16,000. Each
share of the Series F Preferred  Stock  automatically  converts  into  5,610,342
shares of our common  stock upon the filing of an  amendment  to our articles of
incorporation.

                                       32

<PAGE>




Recent Accounting Pronouncements Impacting Future Periods

In December 2004, the Financial  Accounting Standards Board issued a revision of
SFAS No. 123, Accounting for Stock-Based Compensation, which also supersedes APB
25,  Accounting for Stock Issued to Employees.  The revised standard  eliminates
the  alternative  to use Opinion 25's  intrinsic  value method of accounting and
eliminates the  disclosure-only  provisions of SFAS No. 123. The compliance date
for the revised standard was extended by the Securities and Exchange  Commission
(the "SEC") in April 2005.  The revised  standard  applies to all awards granted
after December 31, 2005 and requires the recognition of compensation  expense in
the financial statements for all share-based payment transactions  subsequent to
that date.  The revised  standard also requires the  prospective  recognition of
compensation  expense in the financial statements for all unvested options after
January 1, 2006.  The  adoption of SFAS 123R is not  expected  to be  materially
different from the pro forma expense disclosed.  However,  future changes to the
various  assumptions  used to determine  the fair value of awards  issued or the
amount and type of equity awards granted create  uncertainty as to the amount of
stock-based  compensation  expense  realized.  The Company  will adopt SFAS 123R
effective January 1, 2006.

In May  2005,  the FASB  issued  SFAS No.  154,  Accounting  Changes  and  Error
Corrections  ("SFAS 154"),  which replaces APB No. 20, Accounting  Changes,  and
FASB Statement No. 3, Reporting  Changes in Interim  Financial  Statements.  The
Statement  changes the accounting  for, and reporting of, a change in accounting
principle.  SFAS  154  requires  retrospective  application  to  prior  period's
financial  statements of voluntary  changes in accounting  principle and changes
required by new accounting standards when the standard does not include specific
transition  provisions,  unless  it is  impracticable  to do  so.  SFAS  154  is
effective  for  accounting  changes and  corrections  of errors in fiscal  years
beginning  after December 15, 2005 and will only affect the Company's  financial
statements upon adoption of a change in accounting principle by the Company.

In November 2005, the FASB issued FASB Staff Position 140-2,  Clarification  and
Application  of  Paragraphs  40(b) and 40(c) of FASB  Statement  No. 140," ("FSP
140-2") which clarified that purchases by a transferor,  its affiliates,  or its
agents  of  previously  issued  beneficial  interests,   with  protection  by  a
derivative financial instrument,  from outside parties that are held temporarily
and are classified as trading  securities would not preclude the special purpose
entity  ("SPE")  from  retaining  its  qualifying  status  under  SFAS 140.  The
Company's current structure does not include an SPE.

                                       33

<PAGE>




In November 2005, the FASB issued FASB Staff Position ("FSP") Nos. FAS 115-1/FAS
124-1,  The Meaning of  Other-Than-Temporary  Impairment and Its  Application to
Certain  Investments.  This FSP supersedes  EITF Topic No. D-44,  Recognition of
Other-Than-Temporary  Impairment  upon the Planned Sale of a Security Whose Cost
Exceeds  Fair Value and  nullifies  the  guidance  in EITF Issue No.  03-1,  The
Meaning  of  Other-Than-Temporary  Impairment  and its  Application  to  Certain
Investments   for   determining   whether   impairment   of  an   investment  is
other-than-temporary. This FSP references existing guidance to determine whether
an  impairment of an  investment  is  other-than-temporary.  This FSP applies to
investments in debt and equity securities within the scope of Statements 115 and
124, all equity securities held by insurance  companies and investments in other
equity  securities  that  are  not  accounted  for by  the  equity  method.  The
application of this FSP is required for the Company  beginning  January 1, 2006.
Adoption  of this  FSP is not  expected  to  have a  significant  impact  on the
financial position, results of operations, or liquidity of the Company.

In February  2006,  the FASB issued SFAS No. 155,  Accounting for Certain Hybrid
Financial  Instruments,  an  amendment of FASB  Statements  No. 133 and SFAS 140
(SFAS 155). This statement:

o    Permits fair value  re-measurement for any hybrid financial instrument that
     contains an embedded derivative that otherwise would require bifurcation;

o    Clarifies  which  interest-only  strips and  principal-only  strips are not
     subject to SFAS No. 133, Accounting for Derivative  Instruments and Hedging
     Activities (SFAS 133);

o    Establishes a requirement to evaluate  interests in  securitized  financial
     assets to identify  interests that are  freestanding  derivatives or hybrid
     financial   instruments  that  contain  an  embedded  derivative  requiring
     bifurcation;

o    Clarifies that  concentration  of credit risks in the form of subordination
     are not embedded derivatives; and

o    Amends SFAS 140 to eliminate the prohibition on a qualified special purpose
     entity from holding a derivative  financial  instrument  that pertains to a
     beneficial interest other than another derivative financial instrument.

SFAS 155 is effective for all financial instruments acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15, 2006.
Early  adoption  of this  statement  is  allowed.  Given the  Company's  current
structure,  the  adoption  of SFAS 155 will not impact the  financial  position,
results of operations, or liquidity of the Company.

                                       34

<PAGE>




Impact of Inflation

Inflation affects us most significantly in the area of loan originations and can
have a substantial  effect on interest rates.  Interest rates normally  increase
during periods of high  inflation and decrease  during periods of low inflation.
Profitability  may be directly affected by the level and fluctuation in interest
rates that affect our ability to earn a spread between interest  received on its
loans  and the  costs of its  borrowings.  Our  profitability  is  likely  to be
adversely  affected during any period of unexpected or rapid changes in interest
rates.  A  substantial  increase in interest  rates could  adversely  affect our
ability to originate loans and affect the mix of first and second-lien  mortgage
loan products.  Generally,  first-lien mortgage production increases relative to
second-lien   mortgage   production  in  response  to  low  interest  rates  and
second-lien  mortgage  production  increases  relative  to  first-lien  mortgage
production during periods of high interest rates.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Tabular Disclosure of Contractual Obligations

The following  table  presents our  contractual  obligations  as of December 31,
2005:

<TABLE>
<CAPTION>
<S>                                   <C>                 <C>                     <C>                <C>

                                                                            Payment Due by Period
                                          Total       Less than One Year          1 - 3 Years           3 - 5 Years
                                          -----       ------------------          -----------           -----------
Convertible debentures                 $     511           $     349                $    162          $        -
Short-term debt                              171                 171                       -                   -
Promissory notes                              51                  51                       -                   -
Notes due related parties                     25                  25                       -                   -
Operating leases                             231                 100                     118                  13
                                      ----------          ----------               ---------         -----------
                                       $     989           $     696                $    280          $       13
                                       =========           =========                ========          ==========
</TABLE>

The fair value of our contractual obligations approximate the carrying value.

ITEM 7A.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

General

We carry  interest-sensitive  assets on our balance  sheet that are  financed by
interest-sensitive   liabilities.  Since  these  interest-sensitive  assets  and
liabilities  are not  necessarily  correlated,  we are subject to  interest-rate
risk. A sudden and sustained increase or decrease in interest rates would impact
the fair value of any interest-sensitive  assets on our balance sheet. We do not
hedge against this interest-rate risk.

The  following   table   illustrates   the  timing  of  the  re-pricing  of  our
interest-sensitive  assets and liabilities as of December 31, 2005. We have made
certain  assumptions in determining  the timing of re-pricing of such assets and
liabilities.

                                       35
<PAGE>
<TABLE>
<CAPTION>
<S>                                                        <C>           <C>





                           Description                       Zero to Six Months
                                                             2005          2004
                                                             ----          ----
           Interest-sensitive assets:
             Cash and cash equivalents                     $        80   $      135
                                                           -----------   ----------
                Total interest-sensitive assets            $        80   $      135
                                                           ===========   ==========

           Interest-sensitive liabilities:
               Promissory notes                             $      171  $       221
                                                            ----------  -----------
                 Total interest-sensitive liabilities       $      171  $       221
                                                            ==========  ===========

</TABLE>

ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The response to this item is  incorporated  by reference  from our  consolidated
financial  statements  and notes  thereto  which  are  included  in this  report
beginning on page F-1.  Certain  selected  quarterly  financial data is included
under Item 7 of this Report.

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A.       CONTROLS AND PROCEDURES.

(a)               Disclosure controls and procedures.

We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules  13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of
1934,  as  amended  (the  "Exchange  Act"))  that are  designed  to ensure  that
information  required to be disclosed in our reports  under the Exchange Act, is
recorded,  processed,  summarized and reported within the time periods  required
under  the  SEC's  rules and forms  and that the  information  is  gathered  and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.

As  required  by SEC Rule  15d-15(b),  we carried  out an  evaluation  under the
supervision and with the  participation  of our management,  including the Chief
Executive  Officer and Chief  Financial  Officer,  of the  effectiveness  of the
design and  operation  of our  disclosure  controls and  procedures  pursuant to
Exchange Act Rule 15d-14 as of the end of the period covered by this report. The
Company  carried out, under the supervision  and with the  participation  of the
Company's  management,  including the Company's Chief Executive  Officer and the
Company's Chief Financial  Officer,  an evaluation of the  effectiveness  of the
design  and  operation  of the  Company's  disclosure  controls  and  procedures
performed  pursuant  to Rule  13a-15  under  the  Exchange  Act.  Based on their
evaluation,  the  Company's  Chief  Executive  Officer  and its Chief  Financial
Officer  concluded  that,  as of December 31,  2005,  the  Company's  disclosure
controls and procedures  were not effective  because of the material  weaknesses
discussed herein.

  -                                     36
<PAGE>





Based on the  foregoing  evaluation,  our  Chief  Executive  Officer  and  Chief
Financial Officer have concluded that our disclosure controls and procedures are
not  effective in timely  alerting them to material  information  required to be
included in our periodic SEC filings and to ensure that information  required to
be disclosed in our periodic SEC filings is accumulated and  communicated to our
management,  including our Chief Executive Officer and Chief Financial  Officer,
to allow  timely  decisions  regarding  required  disclosure  as a result of the
deficiency in our internal  control over financial  reporting  discussed  below.
This weakness is a result of our lack of  segregation of duties in the Company's
accounting function due to a lack of financial resources. The Company attends to
resolve this weakness at such time as it financial resources will allow.

Notwithstanding  the  existence  of the  material  weaknesses  described  below,
management has concluded that the consolidated financial statements in this Form
10-K fairly present, in all material respects, the Company's financial position,
results of operations and cash flows for the periods and dates presented.

(b)              Changes in internal control over financial reporting.

There  has been no change  in the  Company's  internal  control  over  financial
reporting (as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and
15d-15(f))  that occurred  during the fourth fiscal  quarter that has materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.

It should be noted  that any  system of  controls,  however  well  designed  and
operated,  can provide only  reasonable,  and not absolute,  assurance  that the
objectives  of the system  will be met. In  addition,  the design of any control
system is based in part upon certain  assumptions about the likelihood of future
events.  Because of these and other  inherent  limitations  of control  systems,
there is only  reasonable  assurance that our controls will succeed in achieving
their stated goals under all potential future conditions.

ITEM 9B.       OTHER INFORMATION.

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

(a) Identification of Directors.

The Board of Directors presently consists of two members.  Directors are elected
annually at the annual meeting of stockholders. Their respective terms of office
continue  until  the  next  annual  meeting  of  stockholders  and  until  their
successors  have been  elected  and  qualified  in  accordance  with our Bylaws.
Certain  information  regarding  each of our current  directors,  including  his
principal  occupation during the past five years and current  directorships,  is
set forth below.

                                       37
<PAGE>

<TABLE>
<CAPTION>
<S>                                    <C>                <C>




Name                                         Age                                Position
-------------------------------------  -----------------  -----------------------------------------------------
Michael A. Barron                             55          Chairman and Chief Executive Officer
Joseph Cosio-Barron                           57          President and In-house Counsel
Paul K. Danner                                47          Director
Stephen J. Croskrey                           44          Director
Edward R. Hollander                           55          Director
</TABLE>

MICHAEL A. BARRON - Chairman & CEO, has been our  Chairman  and Chief  Executive
Officer since February 2006.  Mr. Barron founded  CONSUMER  DIRECT of AMERICA in
May 2001 and has been its Chairman and CEO since its  founding.  From  September
1998 to April 2001,  Mr.  Barron was  semi-retired  and a consultant  to various
mortgage  companies.  From  March  1995-1998,  Mr.  Barron  pioneered  the first
nationwide  commercially  deployed video conference  mortgage financing platform
for Intel  Corporation  which as a  licensed  mortgage  banker  and broker in 20
states funded over $1 billion in closed loans.  In November 1988, he founded and
served as President, until 1992, of Finet Holdings Corporation (NASDAQ:FNCM),  a
publicly traded mortgage broker and banking business  specializing in e-mortgage
financing  on site in real estate  offices and remote loan  origination  via the
Internet (www.finet.com). In June 1979, TRW hired Mr. Barron to develop its real
estate  information  services division  (TRW/REIS) that acquired 11 companies in
the field and eventually  became the world's  largest  repository of real estate
property information - Experian. Mr. Barron was a founder of Citidata, the first
electronic  provider of computerized real estate multiple listing services (MLS)
in the nation from 1975 to 1979.  Mr. Barron was the Senior Planner for the City
of Monterey where he was the HUD liaison for the City's  downtown  redevelopment
project.  He master  planned the city's  redevelopment  of famous  Cannery  Row,
Fisherman's Wharf, and was Secretary of the Architectural Review Committee.  Mr.
Barron  holds a B.S.  degree  from  California  Polytechnic  University  and has
completed courses in the MBA program at UCLA.

JOSEPH A. COSIO-BARRON,  Corporate Counsel,  has been our President and In-house
Counsel since February 2006, and he has served as the Vice President and General
Counsel for Consumer  Direct of America,  Inc. Prior to joining the company from
1996-2002 Mr.  Cosio-Barron  served as the Managing Partner and President of CBS
Consultants,  Inc. a California Corporation.  CBS Consultants,  Inc. a financial
firm offered highly  specialized  services in Securities  compliance and lending
for hotels,  resorts,  and casinos and their development and  construction.  Mr.
Barron received a BA of Business  Management,  San Francisco State College,  JD,
and a Law Degree from Golden  Gate  University  and is a Member of the State Bar
Association in California.

PAUL K. DANNER, served as our Chairman and Chief Executive Officer from November
2004 to February 2006 and as a Director since June 2002. Mr. Danner is active in
the United States Naval Reserve where he currently holds the rank of Captain and
serves  as  the  Commanding   Officer  of  a  Naval  Air  Systems  Command  unit
headquartered  at Naval  Station  Newport,  RI.  Mr.  Danner was  Chairman  from
September  2002 to December  2003 and Vice  Chairman from June 2002 to September
2002.  Mr.  Danner  also  served  as  Secretary  from  June 2002 to May 2003 and
Treasurer  from June 2001 to December  2002.  From August 2001 to May 2002,  Mr.
Danner was a director and Chief Executive Officer of Paragon Homefunding,  Inc.,
the entity  that merged  with a  subsidiary  of the  Company.  Mr.  Danner was a
founder  of that  company.  From  January  1999 to October  2000 Mr.  Danner was
employed in various  roles at  MyTurn.com,  Inc.,  including as Chief  Executive
Officer.  From 1997 to 1998, Mr. Danner served as Vice President of Zekko Corp.,
a technology  company and from 1996 to 1997 Mr. Danner was the managing  partner
of  Technology   Ventures,  a  consulting  firm.  From  1985  to  1998  he  held
executive-level  and sales &  marketing  positions  with a number of  technology
companies  including NEC Technologies and Control Data  Corporation.  Mr. Danner
previously  served on active duty with the United  States Navy where he flew the
F-14 Tomcat.

STEPHEN E. CROSKREY,  has served as a director  since March 2005.  From February
1999 to March 2005, Mr.  Croskrey  served as the President & CEO of the Products
Division of Armor  Holdings,  Inc. Prior to Armor  Holdings,  Mr.  Croskrey held
senior  executive  positions with Allied Signal and Mobil Oil. Mr. Croskrey is a
graduate of the Kellogg School of Management at Northwestern University where he
completed  the MBA program in 1998,  and the United States  Military  Academy at
West  Point  where  in  1982  he  earned  a BS  degree  in  Engineering  and was
commissioned as an officer in the United States Army. Mr. Croskrey spent 6 years
on active duty during which time he attained the rank of Captain and served as a
Company Commander in Korea and Fort Lewis, Washington.

                                       38
<PAGE>





EDWARD R. HOLLANDER,  has served as a director since March 2006. Since 2000, Mr.
Hollander has been a principal in United Agencies,  Inc., rated the 43rd largest
independently  owned  insurance  brokerage in the country and the 7th largest in
the State of California.  Prior to his  association  with United  Agencies,  Mr.
Hollander ran his own insurance and financial  services  brokerage firm.  During
his career,  Mr.  Hollander has held  executive  positions  with  Fireman's Fund
Insurance Company and the CNA Insurance  Companies.  Mr. Hollander completed his
AS degree in Civil Engineering at Los Angeles Community College, and he earned a
dual curriculum BS degree in industrial  technology and construction  management
from California State University at Long Beach.

(b) Identification of Executive Officers.

Officers  are  elected  annually  by our  Board of  Directors  and  serve at the
discretion  of the Board of Directors.  Our  executive  officers as of April 21,
2006 are set forth below.

MICHAEL A. BARRON, Chief Executive Officer, see "Identification of Directors" in
Item 10(a) of this Annual  Report on Form 10-K/A for Mr.  Barron's  biographical
information.

JOSEPH A. COSIO-BARRON,  President and In-house Counsel,  see "Identification of
Directors"  in  Item  10(a)  of  this  Annual  Report  on  Form  10-K/A  for Mr.
Cosio-Barron's biographical information.

SCOTT L. VINING,  43, has served as our Chief  Financial  Officer and  Treasurer
since March 2003.  From September 1996 to March 2003, Mr. Vining was employed by
Armor Holdings,  Inc. most recently as Treasurer and Chief  Accounting  Officer.
Mr. Vining is a certified public accountant. Mr. Vining resigned his position as
Chief Financial Officer on April 26, 2006.

(c) Identification of Certain Significant Employees.

Not applicable.

(d) Family Relationships.

There are no family  relationships  between any director,  executive officer, or
person nominated or chosen by us to become a director or executive officer.

(e) Business Experience.

The business  experience of each of our directors and executive  officers is set
forth in Item  10(a)--Identification  of Directors of this Annual Report on Form
10-K/A and the business  experience of those executive officers who are not also
our directors is set forth in Item  10(b)--Identification  of Executive Officers
of this Annual Report on Form 10-K/A.

The  directorships  held by each of our directors in any company with a class of
securities  registered  pursuant to Section 12 of the Securities Exchange Act of
1934,  as  amended,  or  subject  to  Section  15(d) of such Act or any  company
registered as an investment company under the Investment Company Act of 1940, as
amended, are set forth in Item 10(a)--Identification of Directors of this Annual
Report on Form 10-K/A.

(f) Involvement in Certain Legal Proceedings.

To the best of our  knowledge,  none of our directors or executive  officers has
been involved during the past five years in any legal proceedings required to be
disclosed pursuant to Item 401(f) of Regulation S-K.

                                       39
<PAGE>


(g) Promoters and Control Persons.

Not applicable.


(h) and (i) Audit Committee and Audit Committee Financial Expert.

The  full  Board of  Directors  currently  performs  the  functions  of an Audit
Committee.  Messrs Paul K. Danner,  Stephen  Croskrey,  and Edward R.  Hollander
satisfy the  definition of  "independent"  as defined  under the NASDAQ  listing
standards.  The Board has not adopted a written  charter for the audit committee
at this time.

(j) Procedures for Stockholder Nominations to our Board of Directors.

No  material  changes  to  the  procedures  for  nominating   directors  by  our
stockholders were made in 2005.

Code of Conduct and Ethics

We have  adopted a Code of  Business  Conduct  and  Ethics  that  applies to all
Paragon employees,  including our chief executive and financial  officers.  This
document was previously  filed as Exhibit 14.1 to our Annual Report on Form 10-K
for the year ended December 31, 2004.
Section 16(a) Beneficial Ownership Reporting Compliance.

Section  16(a) of the Exchange Act requires our  Directors  and named  Executive
Officers, and persons who own more than ten percent of a registered class of our
equity  securities,  to file reports of ownership and changes in ownership  with
the  Commission.  Directors  and to furnish us with copies of all Section  16(a)
forms they file with the  Commission.  Based solely upon a review of such forms,
the Company  believes that during the 2005 fiscal year,  each person who, at any
time during fiscal year 2005, was a director, named Executive Officer or holders
of more than 10% of the Company's  common stock  complied with all Section 16(a)
filing requirements, with the following exceptions:

         Mr. Vining received options to purchase  3,000,000 shares of our common
stock on December  8, 2005 at $0.06 per share (the  market  price on that date).
This  transaction  was  subsequently  reported on Form 4 filed by Mr.  Vining on
March 20, 2006.

         Mr. Robinson  exchanged two promissory  notes,  totaling  approximately
$1,643 in aggregate outstanding principal amount and accrued and unpaid interest
as of  December  20,  2005,  for  15,000,000  shares of our common  stock.  This
transaction was  subsequently  reported on Form 3 filed by Mr. Robinson on March
24, 2006.


                                       40
<PAGE>




ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table
The following  table  summarizes the annual  compensation  paid to the Company's
named  Executive  Officers for the three  fiscal years ended  December 31, 2005,
2004 and 2003:
<TABLE>
<CAPTION>
<S>                               <C>         <C>          <C>         <C>         <C>          <C>

                                          Annual Compensation                 Long-term Compensation
                                  ------------------------------------ -------------------------------------
                                                                       Other
                                                                       Annual      Securities
                                  Fiscal        Salary     Bonus       Comp        Underlying    All Other
   Name & Principal Position         Year       ($000s)     ($000s)     ($000s)    Options (#)  Compensation
--------------------------------- ----------- ------------ ----------- ----------- ------------ ------------

Michael A. Barron (1)                2005     $      -     $      -    $      -         -            -
Current Chairman of the Board        2004     $      -     $      -    $      -         -            -
and Current CEO                      2003     $      -     $      -    $      -         -            -

Joseph A. Cosio-Barron (2)           2005     $      -     $      -    $      -         -            -
Current President, Director and      2004     $      -     $      -    $      -         -            -
and In-house counsel                 2003     $      -     $      -    $      -         -            -


Paul K. Danner (3)                   2005     $      -     $      -    $      12        -            -
Former Chairman of the Board         2004     $      33    $      -    $      -         -            -
and Former CEO                       2003     $     183    $      -    $      -         -            -

Scott L. Vining (4) (5)              2005     $      78    $      -    $      10    3,000,000        -
Former Chief Financial Officer and   2004     $      45    $      -    $      -     3,000,000        -
Treasurer                            2003     $      100   $      -    $      -         -            -
</TABLE>

     (1) Mr.  Barron  became our Chairman of the Board of  Directors  and CEO on
         February 16, 2006  pursuant to our  agreement to acquire  Shearson Home
         Loans from Consumer Direct of America.

     (2)  Mr. Cosio-Barron became our President, a Director and In-house Counsel
          on February 16, 2006 pursuant to

     (3)  The amounts for 2004 and 2003  represent the salary paid to Mr. Danner
          pursuant to Mr. Danner's employment

     (4)  The amounts  for 2005  represent  the  payments  made to Mr.  Vining's
          consulting firm. In 2004 and 2003, the

     (5)  Mr. Vining resigned as our Chief Financial Officer and Treasurer April
          26, 2006.

Stock Option Grants in Fiscal Year 2005

We granted the following  options to our named Executive  Officers during fiscal
year 2005:
<TABLE>
<CAPTION>
<S>                                                                                     <C>

                                                                                        Potential Realizable
                                                                                          Value at Assumed
                                                                                           Annual Rates of
                                                                                         Stock Appreciation
                                                                                           For Option Term
                                         Individual Grants                                     ($000s)
                -------------------------------------------------------------------------------------------------
                     Number of      Percent of Total
                     Securities      Options Granted                      Expiration
                 Underlying Options  to Employees in  Exercise Price Per    Date
                    Granted (#)        Fiscal Year          Share                        5%           10%
                -------------------------------------------------------------------------------------------------

Scott L. Vining      3,000,000            31.8%             $0.06         12/7/2015      $113          $287

</TABLE>

                                       41
<PAGE>




Aggregate Stock Option  Exercises in Fiscal Year 2005 and Fiscal Year-End Option
Values

None of our named  Executive  Officers  exercised any stock options in 2005. The
table below sets forth information  concerning the number and value of our named
Executive Officers' unexercised stock options at December 31, 2005.

<TABLE>
<CAPTION>
<S>                                                                                <C>

                                                                                   Value of Unexercised
                                              Number of Securities                 In-The-Money Options
                                             Underlying Unexercised                at 12/31/05 (1) (2)
                                            Options at 12/31/05 (#)                      ($000s)
                                       -----------------------------------  -----------------------------------
Name                                     Exercisable     Non-Exercisable      Exercisable     Non-Exercisable
Paul K. Danner                                --                --          $       --        $         --
Scott L. Vining                           2,000,000         5,000,000       $       20        $         --

</TABLE>

(1) Calculated  on the basis of $0.06 per share,  the closing sales price of the
    common stock on the OTC Bulletin Board December 30, 2005,  less the exercise
    price payable for such shares.

(2) The exercise prices of shares underlying unexercised options were at or
    above the market value of


Equity Compensation Plan Information

The following table  summarizes our equity  compensation  plan information as of
December 31, 2005.
<TABLE>
<CAPTION>
<S>                                                   <C>                          <C>

                     Equity Compensation Plan Information(1)

                                    Number of               Weighted-average          Number of securities
                                 securities to be     exercise price of outstanding   remaining available for
                                   issued upon        options, warrants and rights    future issuance under
                                   exercise of                                      equity compensation plans
                                outstanding options                                   (excluding issued and
                                   and warrants                                       outstanding options,
Plan category                                                                      warrants and rights)
---------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders:            28,225,500              $ 0.08                             71,774,500
Equity compensation plans
not approved by security
holders:                                     18,750              $ 2.83                                   --
TOTAL                                    28,244,250              $ 0.08                             71,774,500

</TABLE>


 (1) The Company's stockholders have approved the 2002 Equity Participation Plan
     under which the Company awards stock options, stock appreciation rights and
     restricted  stock to  individuals  or entities of  outstanding  ability and
     potential  to join and remain  with,  or  provide  consulting  or  advisory
     services to, us and the Company's subsidiaries, by encouraging and enabling
     eligible employees,  non-employee directors,  consultants and advisors, and
     non-employees to whom an offer of employment has been extended,  to acquire
     proprietary  interests in the Company,  and by  providing  such  employees,
     non-employee  directors,  consultants,  advisors, and non-employees with an
     additional  incentive to promote the success of the  Company.  These awards
     can be in the form of stock options and restricted  stock and are generally
     issued at the fair  market  value on the date of grant and  typically  vest
     ratably over three to five years.


                                       42
<PAGE>




Compensation  of Directors -  Currently,  we pay our outside  directors  $25 per
annum for their  services.  This fee is payable in cash or stock at our  option.
During the year ended December 31, 2005 each of Messrs.  Van Sickle and Croskrey
earned $25 in  director  fees for being  non-management  members of our Board of
Directors. These directors fees will be paid in our common stock in 2006.

Employment Agreements - Currently,  our named executive officers are not covered
by employment  contracts.  As noted elsewhere,  Mr. Vining resigned as our chief
financial officer and treasurer April 26, 2006. We are currently searching for a
suitable replacement.

Report on Repricing of Options - During the year ended December 31, 2005, we did
not reprice any options provided to our named executive officers or employees.

Compensation  Committee  Interlocks and Insider  Participation - Currently,  our
entire Board of Directors  handles executive  compensation  matters as we do not
have a separate compensation committee. During the year ended December 31, 2005,
Mr. Danner was a Director and Employee of the Company.  Mr.  Danner  received no
compensation as an employee or director during the year ended December 31, 2005.

Report  on  Executive  Compensation  - Our  executive  compensation  program  is
designed to attract,  motivate and retain  management with incentives  linked to
financial  performance and enhanced  stockholder value. Our compensation program
currently  consists of a number of  components,  including a cash  salary,  cash
incentive bonuses, and stock option grants.

We currently do not have a compensation committee. The Board as a whole, reviews
salary,  bonus  and  option  award  information  for  competitive  companies  of
comparable size in similar  industries,  as well as that of companies not in our
industry which do business in locations where the Company has operations.  Based
in part on this  information,  the  Board  generally  sets  salaries  at  levels
comparable to such companies.  Bonuses are generally discretionary,  but in some
cases may be set forth in employment agreements and based on the achievements of
performance   thresholds.   In  either  case,  bonuses  are  linked  to  Company
performance  during the year and thus align the interest of  executive  officers
with those of the stockholders. The Board also assesses each executive officer's
individual  performance and contribution in determining bonus levels.  The Board
uses grants out of our 2002 Equity  Participation Plan to motivate its executive
officers and to improve  long-term  market  performance of the Company's  common
stock.

Because the Board  believes  that the granting of options to purchase  shares of
common stock provides its executive  employees  with the long-term  incentive to
work for the betterment of the Company, stock options are granted to executives,
in some cases upon  commencement  of employment and in some cases  periodically.
Additionally,  grants  of  options  are  made  periodically  to  other  selected
employees whose  contributions  and skills are critical to the long-term success
of the Company.  Options are generally  granted with the exercise price equal to
the market price of our shares of common  stock on the date of grant,  typically
vest over a period of at least three years and generally  expire ten years after
the date of grant.

Performance   Graph  -  The  following  graph  compares  the  cumulative   total
stockholder return (stock price  appreciation plus reinvested  dividends) of our
common stock with the cumulative total return (including  reinvested  dividends)
of the Nasdaq  Composite  Index,  the Russell 3000 Index,  the Nasdaq  Financial
Index,  certain  companies  selected  in good  faith  by  management  which,  in
management's view, constitute a representative  line-of-business comparison (the
"Peer Group") for the period  commencing  December 31, 2000 through December 31,
2005.

The companies comprising the Peer Group are Countrywide  Financial  Corporation,
New Century  Financial  Corporation,  Irwin Financial  Corporation,  and IndyMac
Bancorp, Inc.

The comparisons  shown in the graph below are based upon historical data and are
not indicative of, nor intended to forecast, the potential future performance of
our  common   stock.   Information   used  in  the  graph  was   obtained   from
http://finance.yahoo.com,  a  source  believed  to be  reliable,  but we are not
responsible for any errors or omissions in such information.

                                       43
<PAGE>


<TABLE>
<CAPTION>
<S>                                 <C>          <C>          <C>          <C>         <C>          <C>



                                    12/31/00     12/31/01     12/31/02     12/31/03    12/31/04     12/31/05
                                    --------     --------     --------     --------    --------     --------
Paragon                              100.00       82.87       1,226.94     1,077.38     142.03       328.28
Nasdaq Composite Index               100.00       78.74        53.77        80.43        87.35       88.69
Russell 2000 Index                   100.00       87.38        67.45        86.82        95.57       99.66
Nasdaq Financial Index               100.00       97.91        79.53        135.77      162.42       117.84
Peer Group Index                     100.00       85.23        104.35       217.64      335.30       303.07
</TABLE>

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The  following  table  sets  forth  as of April  26,  2006  certain  information
regarding the beneficial  ownership of our outstanding  common stock by (i) each
person known to us to own 5% or more of the common  stock,  (ii) our  directors,
(iii) our executive  officers and (iv) our executive officers and directors as a
group. Unless otherwise  indicated,  each of the stockholders shown in the table
below  has  sole  voting  and  investment  power  with  respect  to  the  shares
beneficially owned.

The following table sets forth information regarding the beneficial ownership of
Common  Stock and  Series F  Preferred  Stock as of April  26,  2006 by (i) each
person known by the Company to own beneficially  more than 5% of the outstanding
shares of Common Stock and Series F Preferred  Stock,  (ii) each director of the
Company,  (iii) the  Company's  executive  officers and (iv) all  directors  and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
<S>                                                  <C>                      <C>                  <C>

                                                                              Number of Shares of    Percent of
                                    Number of Shares                           Series F Preferred     Series F
  Name and Address of Beneficial       of Common     Percent of Common Stock        Stock          Preferred Stock
               Owner                 Stock Owned           Owned                   Owned               Owned
               -----                 -----------           -----                   -----               -----
5% Stockholder
--------------
Consumer Direct of America           149,558,791            56.1%                    79                 100%
6330  S. Sandhill, Suite 8
Las Vegas, Nevada 89107

Named Executive Officers and Directors
--------------------------------------
Michael A. Barron (1) (2)            149,558,791            56.1%                    --                  --
Joseph Cosio-Barron (1) (2)                   --              * %                    79                 100%
Stephen Croskrey (3)                  21,437,229             7.9%                    --                  --
Paul K. Danner (4)                    19,699,928             7.2%                    --                  --
Scott L. Vining (5)                    1,551,667              * %                    --                  --
Edward R. Hollander (6)                       --              * %                    --                  --

All current executive officers       192,247,615            71.2%                    79                 100%
and directors as a group
(6 persons)(7)
-------------------------------
* - Less than 1%

</TABLE>

                                       44
<PAGE>




     (1)  Includes  149,558,791  shares of our Common  Stock  owned by  Consumer
          Direct of America.  Messrs.  Michael A. Barron and Joseph Cosio-Barron
          are directors and  executive  officers of Consumer  Direct of America,
          and accordingly may be attributed  beneficial  ownership of the shares
          of Common Stock and Series F Preferred  Stock owned by Consumer Direct
          of  America.  Each  of  Messrs.  Barron  and  Cosio-Barron   disclaims
          beneficial  ownership  of the  shares  of Common  Stock  and  Series F
          Preferred  Stock  owned by  Consumer  Direct of America  except to the
          extent of his pecuniary interest therein. Mr. Barron's address is 6330
          S. Sandhill, Suite 8, Las Vegas, Nevada 89107.

     (2)  Includes  100 shares of Series F  Preferred  Stock  owned by  Consumer
          Direct of America.  Messrs.  Michael A. Barron and Joseph Cosio-Barron
          are directors and  executive  officers of Consumer  Direct of America,
          and accordingly may be attributed  beneficial  ownership of the shares
          of Common Stock and Series F Preferred Stock owned by Consumer Direct
          of  America.  Each  of  Messrs.  Barron  and  Cosio-Barron   disclaims
          beneficial  ownership  of the  shares  of Common  Stock  and  Series F
          Preferred  Stock  owned by  Consumer  Direct of America  except to the
          extent of his pecuniary interest therein. Mr.  Cosio-Barron's  address
          is 6330 S. Sandhill, Suite 8, Las Vegas, Nevada 80107

     (3)  Includes  warrants to purchase  10,551,948 shares of common stock. The
          address for Mr. Croskrey is 830-13 A1A North, #414, Ponte Vedre Beach,
          FL 32082.

     (4)  Includes  825,000 shares held in a custodial  accounts for the benefit
          of Mr.  Danner's minor children of which Mr. Danner is custodian.  The
          address for Mr. Danner is 830-13 A1A North,  #414,  Ponte Vedre Beach,
          FL 32082.

     (5)  The address for Mr.  Croskrey is 830-13 A1A North,  #414,  Ponte Vedra
          Beach, FL 32082.

     (6)  The address for Mr. Hollander is 6330 S. Sandhill, Suite 8, Las Vegas,
          Nevada 89107.

     (7)  See footnotes (1 - 6).


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

We have not been  involved in any  transaction  nor have any  transactions  been
proposed  since the  beginning of our last fiscal year to which the Company is a
party with any of our Directors,  Executive  Officers,  nominees for Director or
any security holder of more than 5% of any class of our voting securities, which
amount exceeds $60 except as set forth below.

Exchange of Indebtedness  for our Common Stock. On December 20, 2005, we entered
into an Exchange  Agreement  with  Matthew  Robinson  ("Robinson"),  an existing
shareholder  and  currently  an  employee,   in  which  Robinson  exchanged  two
promissory  notes,  totaling   approximately  $1,643  in  aggregate  outstanding
principal  amount and accrued and unpaid  interest as of December 20, 2005, into
15,000,000 shares of our common stock.

Loans  from  Related  Parties.  Certain  of our  employees  or our  subsidiaries
employees participated in our debenture issuance during our last fiscal year.

Consulting  Arrangements.  In our last fiscal year,  we paid a  consulting  firm
owned by Mr. Vining, our former chief financial  officer,  fees for his services
in excess of $60.

                                       45

<PAGE>




Section 16(a) Beneficial Ownership Reporting Compliance.

Section  16(a) of the Exchange Act requires our  Directors  and named  Executive
Officers, and persons who own more than ten percent of a registered class of our
equity  securities,  to file reports of ownership and changes in ownership  with
the  Commission.  Directors  and to furnish us with copies of all Section  16(a)
forms they file with the  Commission.  Based solely upon a review of such forms,
the Company  believes that during the 2005 fiscal year,  each person who, at any
time during fiscal year 2005, was a director, named Executive Officer or holders
of more than 10% of the Company's  common stock  complied with all Section 16(a)
filing requirements, with the following exceptions:

         Mr. Vining received options to purchase  3,000,000 shares of our common
stock on December  8, 2005 at $0.06 per share (the  market  price on that date).
This  transaction  was  subsequently  reported on Form 4 filed by Mr.  Vining on
March 20, 2006.
         Mr. Robinson  exchanged two promissory  notes,  totaling  approximately
$1,643 in aggregate outstanding principal amount and accrued and unpaid interest
as of  December  20,  2005,  for  15,000,000  shares of our common  stock.  This
transaction was  subsequently  reported on Form 3 filed by Mr. Robinson on March
24, 2006.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

During the years ended December 31, 2005 and 2004, fees for services provided by
Stevens, Powell & Company, P.A. ("Stevens,  Powell & Company"),  our independent
registered public accounting firm, were as follows:


                                               2005             2004
                                            ------------      ----------
Audit Fees (1)                                 $ 65             $ 69

Tax Fees (2)                                     18               11
                                          ---------------      -------------

Total                                          $ 83             $ 80
                                          ===============      =============
 (1)Audit Fees  consisted  of fees billed for  services  rendered  and  expenses
    incurred for the audit of the Company's annual financial statements,  review
    of financial  statements included in the Company's quarterly reports on Form
    10-Q, and other services  normally provided in connection with statutory and
    regulatory filings.
(2) Tax Fees  consisted of fees billed for  preparation  of required  income tax
returns.
                                     PART IV

ITEM 15.        EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

     (a)    The  following  financial   statements  (which  appear  sequentially
            beginning  at page number  F-1) are  included in this report on Form
            10-K/A#2. Financial statement schedules have been omitted since they
            are either not  required,  not  applicable,  or the  information  is
            otherwise included.

     Report of Independent Registered Public Accounting Firm

     Consolidated Balance Sheets

     Consolidated Statements of Operations

     Consolidated Statements of Comprehensive Loss

     Consolidated Statements of Stockholders' Deficit

     Consolidated  Statements of Cash Flows

     Notes to the Consolidated Financial Statements

                                       46

<PAGE>




     (b)          Exhibits

            The  following  Exhibits  are  hereby  filed as part of this  Annual
Report on Form 10-K/A#2:


  Exhibit                             Description of Exhibit
  Number                              ----------------------
  ------

     2.1  Agreement  and Plan of  Merger  dated as of  October  14,  2002  among
          PlanetRx.com,  Inc.  (n/k/a Paragon  Financial  Corporation),  Paragon
          Homefunding,  Inc. a Delaware  Corporation and Mortgage Express,  Inc.
          (n/k/a PGNF Home Lending Corp.,  et al (the "Mortgage  Express Plan of
          Merger").**

     2.2  Amendment No. 1 to the Mortgage Express Plan of Merger.***

     2.3  Agreement   and  Plan  of  Merger   dated   December   9,  2002  among
          PlanetRx.com, Inc. (n/k/a Paragon Financial Corporation),

     2.4  Amendment No. 1 to the Paragon Homefunding Florida Plan of Merger.***

     2.5  Stock  Purchase  Agreement  between  Paragon and Philip Lagori for the
          sale of PGNF Homelending Corp. +

     3.1  Restated  Certificate  of  Incorporation  filed with the  Secretary of
          State of the State of Delaware on October 6, 1999. ****

     3.2  Certificate of Amendment of the Restated  Certificate of Incorporation
          filed with the Secretary of State of the State of

     3.3  Certificate  of Amendment  to Restated  Certificate  of  Incorporation
          filed with the Secretary of State of the State of

     3.4  Certificate of Amendment of the Restated  Certificate of Incorporation
          filed with the Secretary of State of the State of

     3.5  Certificate of Designations of Series E Preferred Stock.*****

     3.6  Amended and Restated By-laws. ****

     4.1  Form of convertible promissory note. ****

     4.2  5%  Subordinated  promissory  note due November 30, 2005 for $480,000.
          Filed as an exhibit to Paragon's Current Report on

     4.3  5% Subordinated promissory note due May 31, 2008 for $1,051,225. Filed
          as an exhibit to Paragon's Current Report on Form

     10.1 Amended and Restated  Employment  Agreement,  dated as of September 1,
          2002 by and between PlanetRx.com, Inc. (now known as

     10.2 Employment  Agreement,  dated as of  September  4, 2002 by and between
          PlanetRx.com,  Inc. (now known as Paragon  Financial  10.3  Employment
          Agreement,  dated  as of  January  31,  2003  by and  between  Paragon
          Financial   Corporation  and  Philip  Lagori.  Filed  10.4  Employment
          Agreement,  dated  as of  December  30,  2002 by and  between  Paragon
          Financial Corporation and Scott Vining. Filed 10.5 Lease dated January
          1, 2003  between  Ponte  Vedra  Management  Group,  Ltd.  and  Paragon
          Financial Corporation.  Filed as an 10.6 Lease dated September 1, 2000
          between 820 West Lake, LLC and Mortgage Express, Inc. (n/k/a PGNF Home
          Lending  Corp.).  Filed 10.7 Employment  Agreement,  dated October 16,
          2003,  by and  between  Paragon  Financial  Corporation  and George O.
          Deehan.  Filed as 10.8 Employment  Agreement,  dated June 17, 2003, by
          and between Paragon  Financial  Corporation and Joseph P. Bryant,  Jr.
          Filed as 10.9 Employment Agreement,  dated May 6, 2003, by and between
          Paragon Financial Corporation and Steven L. Barnett.  Filed as an 21.1
          Subsidiary of the Registrant.  * 31.1 Certification of Chief Executive
          Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302
          of the 31.2  Certification of Chief Financial Officer pursuant to Rule
          13a-14(a),   as  adopted   pursuant   to  Section   302  of  the  32.1
          Certification  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of
          2002.*

     +    Filed herewith

     +    Filed as an exhibit to  Paragon's  Current  Report on Form  8-K/A,  as
          amended, for an event dated June 30, 2004

     @    This exhibit represents a management contract

     **   This exhibit represents a compensatory plan

     ***  Filed as an exhibit  to  Paragon's  Current  Report on Form 8-K for an
          event dated January 31, 2003

     **** Filed as an exhibit to  Paragon's  Annual  Report on Form 10-K for the
          year ended December 31, 2002

     *****Filed as an  exhibit  to  Paragon's  Quarterly  Report  for the period
          ended September 30, 2003, as amended

     *    As  contemplated  by SEC  Release  No.  33-8212,  these  exhibits  are
          furnished   with  this  Annual   Report  on  Form  10-K  and  are  not
          incorporated   by  reference  in  any  filing  of  Paragon   Financial
          Corporation  under the Securities Act of 1933 or the Securities Act of
          1934, whether made before or after the date hereof and irrespective of
          any general incorporation language in any such filings.


                                       47





<PAGE>

                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



 Report of Independent Registered Public Accounting Firm                F-  1
 Consolidated Balance Sheets                                            F-  2
 Consolidated Statements of Operations                                  F-  3
 Consolidated Statements of Comprehensive Loss                          F-  4
 Consolidated Statements of Stockholders' Deficit                       F-  5
 Consolidated Statements of Cash Flows                                  F-  7
 Notes to the Consolidated Financial Statements                         F-  8



<PAGE>





             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


TO THE BOARD OF DIRECTORS
PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Paragon
Financial  Corporation and subsidiaries  (the "Company") as of December 31, 2005
and 2004, and the related consolidated  statements of operations,  comprehensive
loss,  stockholders'  deficit,  and cash flows for the years ended  December 31,
2005,  2004  and  2003.  These   consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Company  as of  December  31,  2005  and  2004,  and  the  related  consolidated
statements of operations,  comprehensive loss,  stockholders'  deficit, and cash
flows for the years ended December 31, 2005,  2004, and 2003, in conformity with
accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As described in Note 3 to the
consolidated  financial  statements,   the  Company  has  suffered  losses  from
operations and has a negative  tangible net worth that raise  substantial  doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these  matters are also  described in Note 3. The  accompanying  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

As  discussed in Note 17, the  accompanying  consolidated  balance  sheets as of
December  31, 2005 and 2004,  and the  consolidated  statements  of  operations,
comprehensive loss,  stockholders'  deficit,  and cash flows for the years ended
December 31, 2005 and 2004, have been restated.

/s/ STEVENS, POWELL & COMPANY, P.A.
----------------------------------
Stevens, Powell & Company

Jacksonville, Florida
April 15,  2006,  and October  16,  2008,  as to the effects of the  restatement
discussed in Note 17.

                                       F-1
<PAGE>
<TABLE>
<CAPTION>


                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                  AS OF DECEMBER 31, 2005 AND DECEMBER 31, 2004
                    (Dollars in thousands, except share data)
<S>                                                                       <C>               <C>

                                                                               2005              2004
                                                                          ---------------   ---------------
                                                                          (Restated Note 17)(Restated Note 17)
Assets
        Current Assets:
               Cash and cash equivalents                                            $ 80             $ 135
               Fees receivable                                                        38                46
               Prepaid and other current assets                                        -                 9
                                                                          ---------------   ---------------
        Total Current Assets                                                         118               190
                                                                          ---------------   ---------------

               Office property and equipment, net of accumulated
                  depreciation of $64 and $43                                         53                64
               Other assets                                                            2                 3
                                                                          ---------------   ---------------
Total Assets                                                                       $ 173             $ 257
                                                                          ===============   ===============

Liabilities and Stockholders' Deficit
        Current liabilities
               Current portion of long-term debt                                     $ -             $ 100
               Short-term debt                                                       171               221
               Notes payable - related parties                                        51               528
               Notes payable - related parties                                        25                25
               Convertible debentures payable                                        349               379
               Accounts payable                                                      392               371
               Stock subscription proceeds received                                    -               178
               Income taxes payable                                                    -                10
               Accrued expenses - related parties                                     59                59
               Accrued expenses - other                                              621               383
                                                                          ---------------   ---------------
        Total Current Liabilities                                                  1,668             2,254

Long-term debt:
               Liabilities to formerly related parties, less current portion           -               951
               Liabilities of discontinued operations                                162                 -
                                                                          ---------------   ---------------
        Total Liabilities                                                          1,830             3,205
                                                                          ---------------   ---------------
Stockholders' deficit:
        Preferred stock:  Issuable in series, $0.0001 par value; 5,000,000
          shares authorized: Series E, $1,000 stated value;
          659 shares issued and outstanding, respectively                              -                 -
        Common stock, $0.0001 par value; 400,000,000 shares
          authorized, 100,488,798 and 65,212,744 shares issued and
          outstanding at December 31, 2005 and December 31, 2004,
          respectively                                                                 9                 6
        Additional paid-in capital                                                 8,373             6,914
        Accumulated deficit                                                       (9,951)           (9,861)
        Unearned stock-based compensation                                            (88)               (7)
                                                                          ---------------   ---------------
               Total Stockholders' deficit                                        (1,657)           (2,948)
                                                                          ---------------   ---------------
Total liabilities and stockholders' deficit                                        $ 173             $ 257
                                                                          ===============   ===============

      See accompanying notes to consolidated financial statements.

                                      F-2

</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
                    (Dollars in thousands, except share data)

<S>                                                                             <C>                  <C>                 <C>


                                                                                      2005                 2004                2003
                                                                                -----------------    -----------------   -----------
                                                                                 (Restated Note 17)  (Restated Note 17)
Revenue:
         Loan origination fees                                                           $ 1,502              $ 2,034       $ 1,964
                                                                                -----------------    -----------------   -----------
Expenses:
         Salaries, commissions, benefits, and stock-based compensation                     1,446                1,916         2,517
         Loan production costs                                                                20                   91           103
         General and administrative expenses                                                 783                  858         1,113
         Impairment of goodwill                                                                -                  822             -
         Non-recurring charges                                                                80                   25           333
                                                                                -----------------    -----------------   -----------
                          Total expenses                                                   2,329                3,712         4,066
                                                                                -----------------    -----------------   -----------
Operating loss                                                                              (827)              (1,678)       (2,102)

Other income (expense)
         Interest (expense)                                                                 (167)                (107)         (415)
         Loss on disposal of assets                                                            -                  (15)            -
         Gain on exchange of debt for equity                                                 894                    -             -
         Loss on disposal of segment                                                           -                 (102)            -
                                                                                -----------------    -----------------   -----------
Loss from continuing operations before provision for income taxes                           (100)              (1,902)       (2,517)

Provisions (benefit) for income taxes                                                        (10)                 456          (837)
                                                                                -----------------    -----------------   -----------
Loss from continuing operations                                                              (90)              (2,358)       (1,680)

Discontinued operations (Note 2):
         (Loss) income from discontinued operations before provision
             for income taxes                                                                  -               (3,539)          565
         Provision for income taxes                                                            -                    -           282
                                                                                -----------------    -----------------   -----------
(Loss) income from discontinued operations                                                     -               (3,539)          283
                                                                                -----------------    -----------------   -----------
Net Loss                                                                                   $ (90)            $ (5,897)     $ (1,397)
                                                                                =================    =================   ===========
Per share information

Net Loss Per Common Share - Basic and Diluted:
         Loss from continuing operations                                                     $ -              $ (0.03)      $ (0.01)
         (Loss) income from discontinued operations                                          $ -              $ (0.04)          $ -
                                                                                -----------------    -----------------   -----------
                                                                                             $ -              $ (0.07)      $ (0.01)
                                                                                =================    =================   ===========
Weighted average shares outstanding - basic and diluted                                   84,231               85,799       111,620
                                                                                -----------------    -----------------   -----------
        See accompanying notes to consolidated financial statements.

                                      F-3

</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
                    (Dollars in thousands, except share data)

<S>                                                                             <C>                  <C>                 <C>


                                                                                     2005                 2004                2003
                                                                                -----------------    -----------------   -----------
                                                                                (Restated Note 17)   (Restated Note 17)

Net Loss                                                                             $ (90)            $ (5,897)           $ (1,397)
                                                                                -----------------    -----------------   -----------
Other comprehensive income:
         Unrealized gain on available-for-sale securities, net of income taxes           -                    -                 202
                                                                                -----------------    -----------------   -----------
Comprehensive loss                                                                   $ (90)            $ (5,897)           $ (1,195)
                                                                                =================    =================   ===========

        See accompanying notes to consolidated financial statements.

                                      F-4

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
                    (Dollars in thousands) (Restated Note 17)
<S>                                  <C>                        <C>                  <C>        <C>         <C>

                                                                                                            Accumulated
                                                                                     Additional                 Other
                                       Preferred Stock            Common Stock         paid-in  Accumulated Comprehensive
                                     Shares       Amount        Shares       Amount    Capital    Deficit      Income
                                -----------------------------------------------------------------------------------------
Balance - December 31, 2002                -          $ -     62,592,744        $ 6   $ 1,693    $ (2,567)          $ -

January 31 Issuance of shares
  for acquisition                           -            -     52,329,735          5     6,362           -             -
February 4 Issuance of shares
  for acquisition                          -            -      1,224,000          -       836           -             -
March 26 Issuance of preferred
  stock for accrued compensation         659            -              -          -       659           -             -
March 26 Issuance of preferred
  stock for promissory note and
  accrued interest                     1,800            -              -          -     1,812           -             -
March 31 Issuance of warrants
  included in convertible debentures       -            -              -          -        18           -             -
March 31 Beneficial conversion
  feature on convertible debentures        -            -              -          -       222           -             -
March 31 Receipt of cash for
  websites                                 -            -              -          -        13           -             -
May 12 Issuance of restricted
  stock award                              -            -        250,000          -       125           -             -
May 30 Receipt of cash for
  websites                                 -            -              -          -        35           -             -
June 30 Amortization of restricted
  stock award                              -            -              -          -         -           -             -
September 12 Receipt of cash for
  websites                                 -            -              -          -         1           -             -
September 30 Amortization of
  restricted stock award                   -            -              -          -         -           -             -
November 14 Receipt of cash for
  website                                  -            -              -          -         3           -             -
December 31 Amortization of
  restricted stock award                   -            -              -          -         -           -             -
Comprehensive loss:
Net loss                                   -            -              -          -         -      (1,397)            -
Unrealized gain on marketable
  securities                               -            -              -          -         -           -           202
Total comprehensive loss                   -            -              -          -         -           -             -
                                -------------------------------------------------------------------------------------------
Balance - December 31, 2003            2,459            -    116,396,479         11    11,779      (3,964)          202

March 31 Amortization of restricted
  stock award                              -            -              -          -         -           -             -
May 27 Receipt of cash for
  website                                  -            -              -          -        30           -             -
June 30 Amortization of restricted
  stock award                              -            -              -          -         -           -             -
May 31 Disposal of segment            (1,800)           -    (52,329,735)        (5)   (4,948)          -             -
July 1 Issuance of restricted stock
  award to consultant                      -            -        200,000          -        10           -             -
September 30 Amortization of
  restricted stock award                   -            -              -          -         -           -             -
October 13 Issuance of shares for
  insurance premium                        -            -        125,000          -         6           -             -
November 18 Issuance of shares
  for services                             -            -         96,000          -         5           -             -
November 18 Issuance of restricted
  shares for services                      -            -        100,000          -         7           -             -
December 31 Issuance of shares for
  directors fees                           -            -        625,000          -        25           -             -
December 31 Amortization of stock
  award                                    -            -              -          -         -           -             -
  Realization of comprehensive
    income                                 -            -              -          -         -           -          (202)
  Net loss                                 -            -              -          -         -      (5,897)            -
                                -------------------------------------------------------------------------------------------
Balance - December 31, 2004              659            -     65,212,744          6     6,914      (9,861)            -

February 28 Issuance of
  common stock                             -            -     17,207,792          2       528           -             -
February 28 Costs of issuing
  common stock                             -            -              -          -       (14)          -             -
July 1 Issuance of restricted
  stock award                              -            -        650,000          -        33           -             -
July 29 Issuance of restricted
  stock award                              -            -        650,000          -        32           -             -
November 7 Issuance of restricted
  stock award                              -            -        650,000          -        33           -             -
December 15 Issuance of warrants
  included in convertible debentures       -            -              -          -        23           -             -
December 15 Beneficial conversion
  feature on convertible debentures        -            -              -          -        19           -             -
December 20 Exchange of
  debt for equity                          -            -     15,000,000          1       748           -             -
2005 Amortization of restricted
  stock award                              -            -              -          -         -           -             -
December 31 Issuance of common
  stock                                    -            -        333,333          -        10           -             -
December 31 Issuance of common
  stock in recission                       -            -        784,929          -        47           -             -
Net loss                                   -            -              -          -         -         (90)            -
                                -------------------------------------------------------------------------------------------
Balance on December 31, 2005             659          $ -    100,488,798        $ 9   $ 8,373    $ (9,951)          $ -
                                ===========================================================================================

      See accompanying notes to consolidated financial statements.

                                      F-5

</TABLE>

<PAGE>


                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
                    (Dollars in thousands) (Restated Note 17)

                                  (Continued)


                                            Unearned      Total
                                          Stock-based Stockholders'
                                           Compensation  Deficit
                                           ------------  -------
Balance - December 31, 2002                    $ -      $ (868)

January 31 Issuance of shares
  for acquisition                               -       6,367
February 4 Issuance of shares
  for acquisition                               -         836
March 26 Issuance of preferred
  stock for accrued compensation                -         659
March 26 Issuance of preferred
  stock for promissory note and
  accrued interest                              -       1,812
March 31 Issuance of warrants
  included in convertible debentures            -          18
March 31 Beneficial conversion
  feature on convertible debentures             -         222
March 31 Receipt of cash for
  websites                                      -          13
May 12 Issuance of restricted
  stock award                                (125)          -
May 30 Receipt of cash for
  websites                                      -          35
June 30 Amortization of restricted
  stock award                                  10          10
September 12 Receipt of cash for
  websites                                      -           1
September 30 Amortization of
  restricted stock award                       31          31
November 14 Receipt of cash for
  website                                       -           3
December 31 Amortization of
  restricted stock award                       32          32
Comprehensive loss:
Net loss                                        -           -
Unrealized gain on marketable
  securities                                    -           -
Total comprehensive loss                        -      (1,195)
                                         ---------------------
Balance - December 31, 2003                   (52)      7,976

March 31 Amortization of restricted
  stock award                                  31          31
May 27 Receipt of cash for
  website                                       -          30
June 30 Amortization of restricted
  stock award                                  21          21
May 31 Disposal of segment                      -      (4,953)
July 1 Issuance of restricted stock
  award to consultant                         (10)          -
September 30 Amortization of
  restricted stock award                        5           5
October 13 Issuance of shares for
  insurance premium                             -           6
November 18 Issuance of shares
  for services                                  -           5
November 18 Issuance of restricted
  shares for services                          (7)          -
December 31 Issuance of shares for
  directors fees                                -          25
December 31 Amortization of stock
  award                                         5           5
  Realization of comprehensive
    income                                      -        (202)
  Net loss                                      -      (5,897)
                                         ---------------------
Balance - December 31, 2004                    (7)     (2,948)

February 28 Issuance of
  common stock                                  -         530
February 28 Costs of issuing
  common stock                                  -         (14)
July 1 Issuance of restricted
  stock award                                 (33)          -
July 29 Issuance of restricted
  stock award                                 (32)          -
November 7 Issuance of restricted
  stock award                                 (33)          -
December 15 Issuance of warrants
  included in convertible debentures            -          23
December 15 Beneficial conversion
  feature on convertible debentures             -          19
December 20 Exchange of
  debt for equity                               -         749
2005 Amortization of restricted
  stock award                                  17          17
December 31 Issuance of common
  stock                                         -          10
December 31 Issuance of common
  stock in recission                            -          47
Net loss                                        -         (90)
                                         ---------------------
Balance on December 31, 2005                $ (88)   $ (1,657)
                                         =====================

                                      F-6
<PAGE>
<TABLE>
<CAPTION>

                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FORM THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
                             (Dollars in thousands)

<S>                                                             <C>              <C>            <C>

                                                                    2005            2004*           2003*
                                                                -------------    ------------   --------------
                                                            (Restated Note 17)(Restated Note 17)
CASH FLOWS USED IN OPERATING ACTIVITIES:
       Net loss from continuing operations                             $ (90)       $ (2,358)        $ (1,680)

Adjustments to reconcile  net loss to cash  provided
       by operating  activities of continuing operations:
       Depreciation                                                       21              30               26
       Impairment of goodwill                                              -             822                -
       Gain on exchange of equity for debt                              (894)              -                -
       Loss on sale of assets                                              -              15                -
       Loss on disposal of segment                                         -             102                -
       Non-cash stock compensation                                        64              87               86
       Deferred taxes                                                    (10)            444             (446)
       Changes in assets and liabilities:
         Decrease in fees receivable                                       8              34              (31)
         Decrease in prepaid and other current assets                      9              57              105
         Increase (decrease) in accounts payable                          21              91              113
         Increase (decrease) in accrued expenses and
           income taxes                                                  355             (83)             617
                                                                -------------    ------------   --------------
             Cash used in operating activities of continuing
               operations                                               (516)           (759)          (1,210)
             Cash provided (used) by operating activities
                of discontinued operations                                 -            (209)           1,180
                                                                -------------    ------------   --------------
                   Cash used by operating activities                    (516)           (968)             (30)
                                                                -------------    ------------   --------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
       Purchase of property and equipment                                (10)             (2)            (117)
       Cash acquired in purchase of business                               -               -               44
       Proceeds from the sale of assets                                    -              25                -
       Proceeds from the sale of websites                                  -              30               52
                                                                -------------    ------------   --------------
             Cash provided (used) by investing activities of
               continuing operations                                     (10)             53              (21)
             Cash provided (used) by investing activities of
               discontinued operations                                     -             504             (141)
                                                                -------------    ------------   --------------
             Cash (used) provided by investing activities                (10)            557             (162)
                                                                -------------    ------------   --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from issuance of common stock                            347               -                -
       Proceeds from the issuance of warrants                             23               -               18
       Proceeds from common stock subscriptions                            -             178                -
       Proceeds from issuance of debentures                              181               -              222
       Borrowings under line of credit                                     -               -              245
       Repayments of convertible debentures                              (30)              -                -
       Repayments of debt                                                (50)            (45)             (35)
                                                                -------------    ------------   --------------
             Cash provided (used) by financing activities of
               continuing operations                                     471             133              450
             Cash provided (used) by financing activities of
               discontinued operations                                     -            (139)             203
                                                                -------------    ------------   --------------
             Cash provided (used) by financing activities                471              (6)             653
                                                                -------------    ------------   --------------
(Decrease) increase in cash and cash equivalents                         (55)           (417)             461

Cash and Cash Equivalents - Beginning of Period                          135             552               91
                                                                -------------    ------------   --------------
Cash and Cash Equivalents - End of Period                               $ 80           $ 135            $ 552
                                                                =============    ============   ==============


* 2004 and 2003 have been revised  from  previously  reported  amounts (see Note
14).

        See accompanying notes to consolidated financial statements.

</TABLE>

                                      F-7
<PAGE>
                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES  OF  CONSOLIDATION,  BASIS OF  PRESENTATION,  AND  SIGNIFICANT
ACCOUNTING POLICIES

THE COMPANY - Paragon  Financial  Corporation  (the  "Company",  "we",  "us", or
"our")  was  incorporated  in  Delaware  on August  27,  1999 under the name PRx
Holdings,  Inc. and operated as an online  healthcare  destination for commerce,
content,  and  community.  The Company  closed its online  health store in March
2001.  Shortly  thereafter,  the Company  began the process of  liquidating  its
online health store and seeking a merger  partner as an  alternative to complete
liquidation.

Paragon   Homefunding,    Inc.   ("Paragon   Delaware"),   a   privately   held,
development-stage  company based in Ponte Vedra Beach, Florida, was incorporated
in  Delaware  on August 3, 2001,  for the  purpose  of  entering  the  financial
services market through  acquisitions.  On May 31, 2002, the Company merged with
Paragon Delaware.

Pursuant to the merger,  the Company merged with and into Paragon Delaware,  and
issued  55,560,616  shares of common stock to Paragon  Delaware's  stockholders,
constituting 90% of the total shares of the Company's  common stock  outstanding
immediately after the merger.  As a result of the merger,  Paragon Delaware also
assumed approximately $72 of the Company's accrued liabilities,  principally for
legal services.

For  financial  reporting  purposes,  the  merger  has been  accounted  for as a
recapitalization  of  Paragon  Delaware  with  Paragon  Delaware  viewed  as the
accounting acquirer in what is commonly called a reverse acquisition.

 Accordingly,  the financial statements presented before the merger are those of
Paragon Delaware.

ACQUISITIONS - On January 31, 2003,  the Company  completed its merger with PGNF
Home Lending Corp.  ("PGNF") (f/k/a Mortgage Express,  Inc.), and as a result of
the merger, PGNF became a wholly-owned subsidiary. PGNF has been in the business
of originating  residential  mortgage loans since 1998.  Subject to the terms of
the merger agreement, at closing, all of the outstanding shares of PGNF's common
stock converted into 52,329,735  shares of the Company's  common stock valued at
$6.4 million (or approximately  $0.122 per share), or approximately 45.5% of the
then   outstanding   common  stock  after  the   consummation   of  the  merger.
Additionally, the Company issued a promissory note in the amount of $1.8 million
to an entity  wholly-owned by the sole  shareholder of PGNF. The promissory note
accrued  interest at 4.92% and was payable on July 31, 2004.  On March 26, 2003,
the holder of this note  agreed to convert the note and  accrued  interest  into
1,800  shares of our  Series E  preferred  stock with a face value of $1,000 per
share,  and a 4% stated  dividend  payable in cash or shares of common stock, at
the  Company's  option.  This  series of  preferred  stock does not  provide for
redemption and is non-voting.  On May 31, 2004, the Company  divested  itself of
PGNF (See Note 2 - Discontinued Operations).

                                      F-8
<PAGE>





                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES  OF  CONSOLIDATION,  BASIS OF  PRESENTATION,  AND  SIGNIFICANT
ACCOUNTING POLICIES

On February 2, 2003 the Company  completed its merger with Paragon  Homefunding,
Inc. ("PHF").  PHF has been in the business of originating  residential mortgage
loans since 1998. Subject to the terms of the merger agreement,  at closing, all
of the  outstanding  shares of PHF's common stock  converted  into  1,224,000 of
shares of the Company's common stock valued at $836  (approximately  $0.6833 per
share). Additionally, the Company issued promissory notes to the shareholders of
PHF in the  aggregate  principal  amount of $25.  The  promissory  notes  accrue
interest at 4.92% per annum.

The  mergers of PGNF and PHF were  accounted  for as  acquisitions  pursuant  to
Statement of Financial  Accounting  Standards  ("SFAS") No. 141,  Accounting for
Business  Combinations  (SFAS  141).  Accordingly,   the  Company's  results  of
operations  include the operating  results of these companies from the effective
date of these mergers, February 1, 2003.

On January 19, 2005, we completed our acquisition of First Charleston  Mortgage,
LLC ("FCM"),  a South Carolina limited liability  company.  As consideration for
the  acquisition,  we issued  4,285,714  shares of our $0.0001 par value  common
stock  valued at $214 (or  $0.05 per  share).  FCM has been in the  business  of
originating  residential  mortgage loans since 2002 and focused primarily on the
brokering of conforming loans. Subsequently,  we agreed to rescind the agreement
with FCM and its  holders  effective  December  31,  2005.  As a result  of this
agreement, 3,500,785 shares of our common stock were returned to the company and
cancelled.  The 784,929 shares of our common stock not returned are treated as a
non-recurring  expense  in  the  accompanying   financial  statements  presented
elsewhere in this Form 10-K.  The financial and  operating  information  in this
Form 10-K excludes the operations of FCM.

GENERAL - This summary of significant accounting policies is presented to assist
in  understanding  the  financial  statements  of  the  Company.  The  financial
statements  and notes  are  representations  of the  Company's  management.  The
Company's  management is responsible  for the integrity and objectivity of these
financial statements.

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include  the  accounts  of the Company  and its  wholly-owned  subsidiaries.  In
consolidation,  all material  intercompany  balances and transactions  have been
eliminated.   Results  of  operations  of  companies  acquired  in  transactions
accounted  for under the  purchase  method of  accounting  are  included  in the
financial  statements  from  the  date  of the  acquisitions.  The  consolidated
financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America.

USE  OF  ESTIMATES  - In  preparing  financial  statements  in  conformity  with
generally  accepted  accounting  principles,  management  is  required  to  make
estimates and assumptions that

                                      F-9
<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)


NOTE 1 PRINCIPLES  OF  CONSOLIDATION,  BASIS OF  PRESENTATION,  AND  SIGNIFICANT
ACCOUNTING POLICIES

materially affect the reported amounts of assets and liabilities, the disclosure
of contingent  assets and  liabilities at the date of the financial  statements,
and revenues and expenses during the reporting period.  Material  estimates that
are  particularly  susceptible to significant  change in the near term relate to
the  determination of the allowance for loan repurchases and premium  recapture,
carrying value of goodwill,  loss on disposal of our discontinued  segment,  the
gain on exchange of debt for equity,  and the realization of deferred income tax
assets. Actual results could differ from those estimates.

The  determination  of the adequacy of the  allowance for loan  repurchases  and
premium  recapture  losses  related to the  discontinued  operations of PGNF was
based on estimates that may be affected by  significant  changes in the economic
environment and market conditions.  PGNF had obtained insurance to mitigate some
of this risk.

CASH AND CASH  EQUIVALENTS - For purposes of the  statements of cash flows,  the
Company  considers  all  highly  liquid  investments   purchased  with  original
maturities  of  three  months  or  less  on  their  acquisition  date to be cash
equivalents.  Cash and cash  equivalents  include cash on hand and funds held in
checking, money market, and savings accounts.

FEES  RECEIVABLE  - Fees  receivable  consist of fees due on loans  closed on or
before  December 31, 2005 and 2004.  Fees  receivable  are  typically  collected
within  30 to 60 days and  substantially  all of these  fees were  collected  in
January 2006 and 2005, respectively.

MORTGAGE   LOANS   RECEIVABLE   HELD-FOR-SALE   -  Mortgage   loans   receivable
held-for-sale  related to the  discontinued  operations of PGNF consist of loans
made to individuals that are primarily collateralized by residential one-to-four
unit family  dwellings.  Mortgage  loans are  recorded at the  principal  amount
outstanding  net of  deferred  origination  costs  and fees and any  premium  or
discounts.  These loans are carried at the lower of amortized cost or fair value
as   determined   by   outstanding   commitments   from   investors  or  current
investor-yield requirements, calculated on an aggregate basis. Interest on loans
receivable  held-for-sale  is credited to income as earned.  Interest is accrued
only if deemed collectible.

ALLOWANCE FOR LOAN  REPURCHASES  AND PREMIUM  RECAPTURE - The allowance for loan
repurchases and premium recapture related to the discontinued operations of PGNF
represent  expenses  incurred  due to  the  potential  repurchase  of  loans  or
indemnification  of losses based on alleged  violations of  representations  and
warranties that are customary to the mortgage banking  industry.  Provisions for
losses are charged to gain on sale of loans and credited to the  allowance.  The
allowance  represents  the  Company's  estimate of the total losses  expected to
occur and is considered  to be adequate by  management  based upon the Company's
evaluation of the potential  exposure  related to the loan sale  agreements over
the life of the

                                      F-10
<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES  OF  CONSOLIDATION,  BASIS OF  PRESENTATION,  AND  SIGNIFICANT
ACCOUNTING POLICIES

associated loans sold. The Company has purchased  insurance to cover third party
broker fraud, which mitigates some of the risks.

OFFICE  PROPERTY AND EQUIPMENT,  NET - Office  property and equipment,  net, are
stated at cost less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the asset as follows:

       Computer hardware                         Five years
       Furniture and fixtures                    Five to seven years
       Computer software                         Three years
       Leasehold improvements                    Lower of life of lease or asset

AVAILABLE-FOR-SALE    SECURITIES   AND    COMPREHENSIVE    LOSS   -   Securities
available-for-sale  are carried at fair value with  unrealized  gains and losses
reported in other  comprehensive  income.  Realized gains (losses) on securities
available-for-sale  are  included in other  income  and,  when  applicable,  are
reported as a reclassification  adjustment,  net of tax, in other  comprehensive
income.  Gains  and  losses  on  sales  of  securities  are  determined  on  the
specific-identification method.

Equity securities held principally for resale in the near term are classified as
trading  securities  and  recorded at their fair  values.  Unrealized  gains and
losses on trading  securities are included in other income.  During 2005,  2004,
and 2003, the Company did not engage in trading securities.

Declines in the fair value of individual and available-for-sale securities below
their cost that are other than temporary result in write-downs of the individual
securities to their fair value. The related write-downs are included in earnings
as realized  losses.  As of December 31, 2005, no  securities  were owned by the
Company.

In 2005 and 2004, the Company had no items of comprehensive  loss other than net
loss.

DERIVATIVES - The Company does not purchase,  sell, or utilize off-balance sheet
derivative financial instruments or derivative commodity instruments.

GOODWILL - Goodwill  represents  the excess of the purchase  price over the fair
value of the net assets acquired in a purchase  business  combination.  Goodwill
and other  intangible  assets are  stated on the basis of cost.  Under SFAS 142,
goodwill is no longer amortized, but is reviewed for impairment annually or more
frequently if impairment indicators arise. See also "Impairment" which follows.

                                      F-11
<PAGE>





                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES  OF  CONSOLIDATION,  BASIS OF  PRESENTATION,  AND  SIGNIFICANT
ACCOUNTING POLICIES

IMPAIRMENT - Long-lived assets,  including certain identifiable  intangibles and
goodwill,  are reviewed for impairment annually or whenever events or changes in
circumstances indicate that the carrying amount of the asset in question may not
be recoverable  including,  but not limited to, a deterioration of profits for a
business segment that has long-lived  assets,  and when other changes occur that
might impair recovery of long-lived assets. During 2004, management reviewed the
Company's long-lived assets related to PGNF and recorded an impairment charge of
$2,582.

At December 31, 2005 and 2004, management has reviewed its long-lived assets and
has determined that no impairment existed,  and the Company's long-lived assets,
including certain identifiable  intangibles and goodwill,  were fairly valued at
December  31, 2005 and 2004.  The method used to determine  the  existence of an
impairment includes measuring discounted operating cash flows estimated over the
remaining useful lives of the related long-lived assets or estimated  realizable
amounts on assets of  discontinued  operations.  Impairment  is  measured as the
difference  between fair value and  unamortized  cost at the date  impairment is
determined.  Assumptions  used in determining the expected  operating cash flows
used to test for any  impairment  of goodwill  are  consistent  with  historical
earnings  of the  business to which the  identifiable  intangible  and  goodwill
relates.

Subsequent to the years ended December 31, 2005 and 2004, the Company recognized
an impairment charge of $822 in connection with the value of goodwill. After the
impairment  charge,  goodwill  had a remaining  book value of $0 (see Note 17).

GAIN ON EXCHANGE OF DEBT FOR EQUITY - We  accounted  for the exchange of certain
outstanding  debt as an  extinguishment  of debt and recorded a gain pursuant to
APB 26 and recorded a gain equal to the difference between the face value of the
debt  instruments  and the value of the  equity  securities  issued for the debt
instruments.  The gain recognized in the year ended 2005 was approximately $0.01
per share.

Prior to SFAS 145, material gains and losses from the extinguishment of debt and
troubled debt  restructurings  were  required to be classified as  extraordinary
pursuant to APB 30. Under SFAS 145,  the material  gains and losses are reported
as extraordinary only if the event creating the gain or loss is both unusual and
infrequent in occurrence.  The exchange of debt for equity is clearly  unrelated
to the typical activities of our business,  and hence, the transaction should be
considered unusual in nature. But, we do not consider the exchange of equity for
debt to be  infrequent  as we  continue  settling  our debts  for  equity in all
situations where our creditors agree to such an exchange.

                                      F-12
<PAGE>






                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES  OF  CONSOLIDATION,  BASIS OF  PRESENTATION,  AND  SIGNIFICANT
ACCOUNTING POLICIES

GAIN ON SALES OF LOANS - Gains or losses  resulting from sales of mortgage loans
related to the  discontinued  operations  of PGNF are  recognized at the date of
settlement  and are based on the  difference  between the  selling  price of the
mortgage  loans  sold  and  the  carrying  value  of  the  related  loans  sold.
Nonrefundable  fees and direct costs associated with the origination of mortgage
loans are  deferred  and  recognized  when the loans  are sold.  Loan  sales are
accounted for as sales when control of the loans is  surrendered,  to the extent
that consideration  other than beneficial  interests in the loans transferred is
received in the exchange.

ORIGINATION  FEES -  Origination  fees are  comprised  of points  and other fees
charged on mortgage  loans  originated,  processed,  and closed by the  Company.
Points  and fees are  primarily  a  function  of the  volume of  mortgage  loans
originated.  Origination  fees on loans originated by the Company related to the
discontinued  operations  of PGNF that were  subsequently  sold are deferred and
recognized as part of the gain on sale of loans.

INCOME  TAXES - The  Company  accounts  for income  taxes  pursuant to SFAS 109,
Accounting  for Income  Taxes.  Under the asset and liability  method  specified
thereunder,  deferred taxes are determined  based on the difference  between the
financial  reporting  and tax  bases of assets  and  liabilities.  Deferred  tax
liabilities  are offset by deferred tax assets  relating to net  operating  loss
carryforwards and deductible temporary differences.

ADVERTISING  -  The  Company's  advertising  costs  are  expensed  as  incurred.
Advertising expense were $9, $20, and $60 for the years ended December 31, 2005,
2004 and 2003 respectively.

RECLASSIFICATIONS  -  Certain  reclassifications  have been made to the 2004 and
2003 financial  statements in order to conform to the  presentation  adopted for
2005. These reclassifications had no effect on net income or retained earnings.

FAIR VALUE OF  FINANCIAL  INSTRUMENTS  -  Financial  instruments  of the Company
consist of cash and cash  equivalents,  receivables for fees,  accounts payable,
notes  payable,  and  convertible  debentures  payable.  The carrying  amount of
financial instruments approximates fair value.

CONCENTRATIONS  OF RISKS - The  Company is  required by SFAS No. 105 to disclose
concentrations  of  credit  risk  regardless  of the  degree of such  risk.  The
Company's  operations  are  concentrated  in the  single-family  first  mortgage
residential  real estate  market.  The Company  operates in a heavily  regulated
environment.  The  operations  of the  Company  are  subject to changes in laws,
administrative directives and rules and regulations of federal, state, and local
governments and regulatory  agencies.  Such changes may occur with little notice
of time for compliance.  Further, the Company performs credit evaluations of its
customers' financial

                                      F-13
<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES  OF  CONSOLIDATION,  BASIS OF  PRESENTATION,  AND  SIGNIFICANT
ACCOUNTING POLICIES

condition,  performs its operations  under contracts and requires  deposits when
deemed  necessary.  Historically,  the Company has not incurred any  significant
credit losses.

The  Company  originates  and  processes  loans that are closed and  immediately
assigned to financial  institutions  or mortgage  banking  companies  throughout
Florida,  although the majority of the Company's  business is in the Central and
North Florida areas. The Company closed loans with  approximately  ten financial
institutions  or mortgage  companies of which only two, Chase Mortgage and Irwin
Mortgage, exceeded 10% of the total volume for the years ended December 31, 2005
and 2004.

The Company maintains its cash in bank deposit accounts at a high credit-quality
financial  institution.  At times  during the years ended  December 31, 2005 and
2004, the Company's cash balances may have exceeded the federally-insured limit.
Management  believes  this  policy will not  adversely  affect the  Company.  At
December 31, 2005 and 2004,  cash balances did not exceed the  federally-insured
limit.

STOCK-BASED COMPENSATION - SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS 123), as amended by SFAS No. 148, Accounting for Stock-Based  Compensation
- Transition and Disclosure, (SFAS 148) establishes a fair value based method of
accounting for stock-based employee  compensation plans; however, it also allows
an entity to  continue  to measure  compensation  cost for those plans using the
intrinsic value based method of accounting  prescribed by Accounting  Principles
Board Opinion No. 25,  Accounting  for Stock Issued to Employees (APB 25). Under
the fair value  based  method,  compensation  cost is measured at the grant date
based on the value of the award and is recognized over the service period, which
is  usually  the  vesting  period.  Under  the  intrinsic  value  based  method,
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date or other measurement date over the amount an employee must pay
to acquire the stock.  We have elected to continue to account for employee stock
compensation  plans under APB 25 with pro forma  disclosures of net earnings and
earnings per share,  as if the fair value based method of accounting  defined in
SFAS 123 had been applied.  Restricted  stock awards are  generally  recorded as
compensation  expense using fixed  accounting  over the vesting periods based on
the market value on the date of grant except in situations  where  provisions of
the agreements  allow for  acceleration  of vesting upon a certain event. If the
event occurs,  this may result in an  acceleration of vesting and recognition of
associated expense.

                                      F-14
<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES OF CONSOLIDATION, BASIS OF PRESENTATION, AND SIGNIFICANT
ACCOUNTING POLICIES

If compensation  cost for stock option grants had been  determined  based on the
fair value on the grant dates for fiscal 2005, 2004 and 2003 consistent with the
method  prescribed  by SFAS 123, our net loss and loss per share would have been
adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
<S>                                                            <C>            <C>             <C>

                                                                   2005            2004           2003
                                                                   ----            ----           ----
   Net loss from continuing operations, as reported            $    (90)      $  (2,358)      $ (1,680)
   Stock-based employee compensation expense
     determined under fair value method for all awards
     net of related tax effects                                     146             521            707
                                                               ---------       ---------      ---------
   Pro forma net loss from continuing operations               $   (236)      $  (2,879)      $ (2,387)
                                                               =========       =========      =========

   Net loss per share from continuing operations:
        Basic and diluted, as reported                         $  (0.00)      $   (0.03)      $  (0.01)
                                                               =========      ==========      =========
        Pro forma basic and diluted                            $  (0.00)      $   (0.03)      $  (0.02)
                                                               =========      ==========      =========
</TABLE>


IMPLEMENTATION  OF NEW  ACCOUNTING  STANDARDS - In December  2004, the Financial
Accounting  Standards  Board issued a revision of SFAS No. 123,  Accounting  for
Stock-Based  Compensation,  which also  supersedes APB 25,  Accounting for Stock
Issued to Employees.  The revised  standard  eliminates  the  alternative to use
Opinion  25's   intrinsic   value  method  of  accounting   and  eliminates  the
disclosure-only  provisions of SFAS No. 123. The compliance date for the revised
standard was extended by the Securities and Exchange  Commission  (the "SEC") in
April 2005.  The revised  standard  applies to all awards granted after December
31, 2005 and requires the recognition of  compensation  expense in the financial
statements for all share-based payment transactions subsequent to that date. The
revised  standard  also requires the  prospective  recognition  of  compensation
expense in the financial  statements  for all unvested  options after January 1,
2006. The adoption of SFAS 123R is not expected to be materially  different from
the  pro  forma  expense  disclosed.  However,  future  changes  to the  various
assumptions  used to determine the fair value of awards issued or the amount and
type of equity awards granted create uncertainty as to the amount of stock-based
compensation  expense  realized.  The  Company  will adopt  SFAS 123R  effective
January 1, 2006.

In May  2005,  the FASB  issued  SFAS No.  154,  Accounting  Changes  and  Error
Corrections  ("SFAS 154"),  which replaces APB No. 20, Accounting  Changes,  and
FASB Statement No. 3, Reporting  Changes in Interim  Financial  Statements.  The
Statement  changes the accounting  for, and reporting of, a change in accounting
principle.  SFAS  154  requires  retrospective  application  to  prior  period's
financial  statements of voluntary  changes in accounting  principle and changes
required by new accounting standards when the standard does not include specific
transition  provisions,  unless  it is  impracticable  to do  so.  SFAS  154  is
effective  for  accounting  changes and  corrections  of errors in fiscal  years
beginning after December 15, 2005 and will only affect the

                                      F-15
<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES OF CONSOLIDATION, BASIS OF PRESENTATION, AND SIGNIFICANT
ACCOUNTING POLICIES

Company's financial statements upon adoption of a change in accounting principle
by the Company.

In November 2005, the FASB issued FASB Staff Position 140-2,  Clarification  and
Application  of  Paragraphs  40(b) and 40(c) of FASB  Statement  No. 140," ("FSP
140-2") which clarified that purchases by a transferor,  its affiliates,  or its
agents  of  previously  issued  beneficial  interests,   with  protection  by  a
derivative financial instrument,  from outside parties that are held temporarily
and are classified as trading  securities would not preclude the special purpose
entity  ("SPE")  from  retaining  its  qualifying  status  under  SFAS 140.  The
Company's current structure does not include an SPE.

In November 2005, the FASB issued FASB Staff Position ("FSP") Nos. FAS 115-1/FAS
124-1,  The Meaning of  Other-Than-Temporary  Impairment and Its  Application to
Certain  Investments.  This FSP supersedes  EITF Topic No. D-44,  Recognition of
Other-Than-Temporary  Impairment  upon the Planned Sale of a Security Whose Cost
Exceeds  Fair Value and  nullifies  the  guidance  in EITF Issue No.  03-1,  The
Meaning  of  Other-Than-Temporary  Impairment  and its  Application  to  Certain
Investments   for   determining   whether   impairment   of  an   investment  is
other-than-temporary. This FSP references existing guidance to determine whether
an  impairment of an  investment  is  other-than-temporary.  This FSP applies to
investments in debt and equity securities within the scope of Statements 115 and
124, all equity securities held by insurance  companies and investments in other
equity  securities  that  are  not  accounted  for by  the  equity  method.  The
application of this FSP is required for the Company  beginning  January 1, 2006.
Adoption  of this  FSP is not  expected  to  have a  significant  impact  on the
financial position, results of operations, or liquidity of the Company.

In February  2006,  the FASB issued SFAS No. 155,  Accounting for Certain Hybrid
Financial  Instruments,  an  amendment of FASB  Statements  No. 133 and SFAS 140
(SFAS 155). This statement:

o    Permits fair value  re-measurement for any hybrid financial instrument that
     contains an embedded derivative that otherwise would require bifurcation;

o    Clarifies  which  interest-only  strips and  principal-only  strips are not
     subject to SFAS No. 133, Accounting for Derivative  Instruments and Hedging
     Activities (SFAS 133);

o    Establishes a requirement to evaluate  interests in  securitized  financial
     assets to identify  interests that are  freestanding  derivatives or hybrid
     financial   instruments  that  contain  an  embedded  derivative  requiring
     bifurcation;

o    Clarifies that  concentration  of credit risks in the form of subordination
     are not embedded derivatives; and

                                      F-16
<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 1 PRINCIPLES  OF  CONSOLIDATION,  BASIS OF  PRESENTATION,  AND  SIGNIFICANT
ACCOUNTING POLICIES

o        Amends SFAS 140 to eliminate  the  prohibition  on a qualified  special
         purpose  entity from holding a  derivative  financial  instrument  that
         pertains  to  a  beneficial  interest  other  than  another  derivative
         financial instrument.

SFAS 155 is effective for all financial instruments acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15, 2006.
Early  adoption  of this  statement  is  allowed.  Given the  Company's  current
structure,  the  adoption  of SFAS 155 will not impact the  financial  position,
results of operations, or liquidity of the Company.

NOTE 2.         DISCONTINUED OPERATIONS

On June 30,  2004,  we closed the sale of our PGNF Home Lending  Corp.  ("PGNF")
subsidiary  effective  May 31,  2004.  PGNF was a mortgage  bank  focused on the
wholesale  sub-prime  credit  market.  With  the  sale of PGNF,  we  exited  the
wholesale  sub-prime  credit  market.  Pursuant  to the  agreement,  the Company
exchanged the common stock of PGNF,  as well as the  assumption of all of PGNF's
liabilities, contingent and otherwise, for 52,329,735 shares of our common stock
valued at $3,140  (based  upon the closing  price of $0.06 on May 31,  2004) and
1,800  shares of our Series E preferred  stock plus accrued  dividend  valued at
$1,998.  As a result of the  disposal,  the Company  recognized  a loss of $102,
during the year ended December 31, 2004.

In  accordance  with SFAS No.  144,  Accounting  for  Impairment  or Disposal of
Long-Lived  Assets,  the assets and liabilities of the PGNF have been classified
as discontinued operations,  with its operating results in the current and prior
periods  reported in  discontinued  operations  for the years ended December 31,
2004 and 2003.

The  Securities  and Exchange  Commission  has inquired about the method used to
value the stock issued in consideration  for the PGNF merger (See Note 1). While
we believe the value  placed on the stock  issued  represents  its fair value at
that  time,  there  can be no  guarantee  that we will not have to  restate  our
previously issued financial statements to reflect a different value.

                                      F-17

<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 2.         DISCONTINUED OPERATIONS

At May 31, 2004, PGNF had total assets of $21,522,  which includes $1,532 owed
to PGNF  from the  Company.  At May 31,  2004,  PGNF had  total  liabilities  of
$16,467.

A summary of the operating results of the discontinued  operations for the years
ended December 31, 2004 and 2003 is as follows:


<TABLE>
<CAPTION>
<S>                                                               <C>           <C>



                                                                       2004          2003
                                                                       ----          ----

                    Gain on sale of loans                          $   2,160      $  7,230
                    Loan origination fees                                551         3,031
                    Interest, dividends, and other income                546         1,680
                                                                  ------------- -------------
                         Total revenue                                 3,257        11,941
                                                                  ------------- -------------

              Expenses:
                  Salaries, commissions, benefits, and
                     stock-based compensation                         2,151         5,914
                  Loan production costs                                 310         1,168
                  General and administrative expenses                 1,519         2,989
                  Impairment of goodwill                              2,582             -
                  Non-recurring expense (income)                      (198)             -
                  Interest expense                                      436         1,259
                  Other (income) expense                                (4)            46
                                                                  ------------- -------------
                         Total expenses                               6,796        11,376
                                                                  ------------- -------------

              (Loss) income from continuing operations
                 before provision for income taxes                    (3,539)         565
              Provision for income taxes                                  -           282
                                                                  ------------- -------------

              (Loss) income from continuing operations            $   (3,539)     $   283
                                                                  ============= =============

</TABLE>

                                      F-18
<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 3.         GOING CONCERN

As shown in the accompanying  consolidated financial statements, we incurred net
losses of $90 for the year ended December 31, 2005, and have  cumulative  losses
of $9,951. At December 31, 2005, we had a stockholders' deficit of $1,657. These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern. The accompanying consolidated financial statements do not include
any  adjustments  that might  result from the outcome of this  uncertainty.  The
Company's continued existence depends on a number of factors,  including but not
limited  to, the  ability to  originate  loans,  to secure  adequate  sources of
capital  and to locate and fund  acquisitions  of suitable  companies.  However,
there can be no  assurance  that the Company will be able to continue as a going
concern.

NOTE 4.         OFFICE PROPERTY AND EQUIPMENT

Office property and equipment from continuing operations as of December 31, 2005
and 2004 are summarized as follows:
<TABLE>
<CAPTION>
<S>                                                                     <C>             <C>

                                                                             2005             2004
                                                                             ----             ----
           Furniture and fixtures                                         $    21          $    20
           Office equipment                                                    93               87
           Leasehold improvements                                               3                -
                                                                        ---------       ----------
                                                                              117              107
           Accumulated depreciation                                          (64)             (43)
                                                                        ---------       ----------
                                                                          $    53          $    64
                                                                        =========       ==========
</TABLE>

Depreciation  expense for the years ended  December 31, 2005,  2004 and 2003 was
$21, $30, and $26 respectively.

NOTE 5.         GOODWILL

Goodwill  represents the excess of the merger  consideration over the fair value
of the net assets,  including identifiable  intangible assets. The consideration
given in a merger or  acquisition  is based upon  negotiation  with  prospective
merger candidates and management's cash flow valuation model. Goodwill is stated
on the basis of cost and is reviewed for impairment  annually or more frequently
if impairment indicators arise.



                                      F-19

<PAGE>







                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

A summary of goodwill recognized from continuing operations follows:
<TABLE>
<CAPTION>
<S>                                                                              <C>

PHF - Consideration  for the merger was $876 consisting of $836 in shares of the
Company's  common stock (1,224,000  shares at approximately  $0.6833 per share),
$25 in a promissory note issued by the Company, and $15 in costs associated with
the merger. At the time of the merger, the fair value of the net
assets of PHF was $54.                                                           $             822
Less impairment charge (see below)                                                            (822)
                                                                                 -------------------
                                                                                 $              --
                                                                                 ===================
</TABLE>

Subsequent to the years ended December 31, 2005 and 2004, the Company recognized
an impairment charge of $822 in connection with the value of goodwill. After the
impairment  charge,  goodwill  had a remaining  book value of $0 (see Note 17).

NOTE 6.         OTHER ASSETS

Other assets from continuing  operations at December 31, 2005 and 2004,  include
security deposits of $2 and $3, respectively.

                                      F-20

<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)


NOTE 7.         DEBT

<TABLE>
<CAPTION>
<S>                                                                                 <C>           <C>

The Company's debt as of December 31, 2005 and 2004 was as follows:
                                                                                        2005          2004
                                                                                    ------------- -------------

Revolving line of credit  subject to a  standstill  agreement  with a commercial
    bank  secured by certain  equipment  and  furniture  of the Company  bearing
    interest at prime rate  requiring  monthly  principal  reductions of $10 per
    month, through
    April 1, 2006 (see below), currently in default                                  $       171   $         221
Convertible debentures bearing interest at 15%, due December 31, 2004;
    subsequently modified to mature December 31, 2006 with a reduction in
    interest to 10%                                                                          349             379
Convertible debentures bearing interest at 12%, due December 31, 2007,
     currently in default                                                                    162              -
Insurance premium finance note bearing an interest rate of 8% with monthly
     principal and interest payments of $6, due May 1, 2006, currently in default.            27              24
Promissory note to vendor bearing interest of 15% with monthly principal
     and interest payments of $4, currently in default                                        24              24
Promissory note to shareholders of PHF bearing interest at 4.92%, due
     December 31, 2005, currently in default                                                  25              25
Subordinated note payable to former stockholder bearing interest at 5%, due
    November 30, 2005 (see below)                                                              -             480
Subordinated note payable to former stockholder bearing interest at 5%, due
     May 31, 2008 (see below)                                                                  -           1,051
                                                                                    -------------   -------------
Total debt                                                                           $       758    $      2,204
                                                                                    =============   =============
</TABLE>

On September 24, 2004, the Company  defaulted on its promissory  note dated June
4, 2003 to Bank of America, N.A. ("BoA") being unable to repay this note in full
when  demanded to do so by BoA. BoA has  commenced  legal action  against us and
other  guarantors of the  indebtedness  for repayment.  On December 13, 2004, we
entered into a standstill  agreement with BoA whereby, for a principal reduction
payment of $25 and the payment of an  extension  fee and BoA's  legal fees,  the
maturity  date of the note was extended to December 1, 2005,  the interest  rate
was increased to the bank's prime rate plus 4%, and required principal reduction
payments of $5 per month  through  November 1, 2005.  On January  27,  2006,  we
entered into a second standstill agreement with BoA, effective December 1, 2005,
wherein we paid a loan  extension fee of $20 and BoA's legal fees.  The maturity
of the note was extended to May 1, 2006,  the interest rate was increased to the
bank's prime rate plus 5%, and the principal  reduction  fees were  increased to
$10 per month through April 1, 2006. On March 1, 2006, we defaulted on the terms
of the second standstill agreement with BoA, and this loan remains in default.

                                      F-21

<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 7. DEBT (continued)

On January 1, 2005, the Company  defaulted on its subordinated  promissory notes
due to a formerly related party. These notes represent  indebtedness incurred in
the divestiture of PGNF. On April 7, 2005, the Company reached an agreement with
the holder of the notes whereby the Company would begin making monthly  interest
payments of  approximately  $7 on the notes  beginning April 2005. The agreement
does not include a waiver of rights by the holder.

In December 2005,  Matthew  Robinson  acquired via a public auction the notes we
issued to the owners of PGNF for the sale of PGNF.  On  December  20,  2005,  we
entered  into an Exchange  Agreement  with  Matthew  Robinson  ("Robinson"),  an
existing shareholder and currently an employee,  in which Robinson exchanged two
promissory  notes,  totaling   approximately  $1,643  in  aggregate  outstanding
principal  amount and accrued and unpaid  interest as of December 20, 2005, into
15,000,000  shares of our common stock,  or  approximately  $0.11 per share.  On
December 20,  2005,  the closing  price as quoted on the OTC Bulletin  Board was
$0.05 per share.

Maturities of debt at December 31, 2005 are as follows:

       Year Ending                                             Amount
       -----------                                             ------
       2006                                                     $ 596
       2007                                                       162
                                                         --------------
       Total                                                    $ 758
                                                         ==============


NOTE 8.         STOCKHOLDERS' DEFICIT

PREFERRED STOCK - The Company's certificate of incorporation authorizes a series
of 5,000,000 shares of preferred stock with a par value of $0.0001 and with such
rights, privileges and preferences, as the Board of Directors may determine.

On March 26,  2003,  our Board of  Directors  authorized  the  issuance of 3,000
shares of preferred  stock,  par value  $0.0001 per share,  and  designated  the
shares as Series E Preferred Shares (the "Series E Preferred"). The stated value
of each share of the Series E  Preferred  is $1,000 per share;  has a  mandatory
dividend  of 4% of the stated  value,  per annum and shall be payable on January
1st of each year and is  payable in either  shares of our common  stock or cash;
has no voting rights; and is not convertible.  On March 26, 2003, certain of our
executive officers converted certain accrued salary and benefits into 659 shares
of Series E Preferred. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation,  the holders of Series E Preferred
Shares will be entitled to receive,  prior and in preference to any distribution
of the assets or surplus funds of the  Corporation  to the holders of any shares
of common stock by reason of the ownership thereof, an amount equal to the fixed
sum of the Stated Value per share and any accrued  dividends thereof and no more
(the  "Preferential  Amount").  If, upon the  occurrence  of such an event,  the
assets and funds thus distributable

                                      F-22
<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 8.         STOCKHOLDERS' DEFICIT (continued)

among the holders of Series E Preferred  Shares shall be  insufficient to permit
the payment to such holders of the full  Preferential  Amount,  then, the entire
assets and funds of the Corporation  legally  available for  distribution to the
holders of the Series E Preferred Shares shall be distributed ratably among such
holders in accordance with the respective amounts which would be payable on such
shares if all amounts  payable  thereon were paid in full.  After the payment or
setting apart of the full Preferential Amount required to be paid to the holders
of Series E Preferred Shares, the holders of shares of common stock or any other
stock of the Corporation ranking in liquidation junior to the Series E Preferred
Shares  shall be entitled to receive  ratably  all  remaining  assets or surplus
funds  of  the   Corporation.   Neither  the  merger  or  consolidation  of  the
Corporation,  nor the sale,  lease or  conveyance  of all or part of its assets,
shall be deemed to be a liquidation, dissolution or winding up of the affairs of
the Corporation, either voluntarily or involuntarily,  within the meaning of the
liquidation provisions of the Series E Preferred Shares.

On March 26, 2003, the holder of the note issued for the PGNF acquisition agreed
to convert  the note and  accrued  interest  into  1,800  shares of our Series E
preferred stock with a face value of $1,000 per share,  and a 4% stated dividend
payable in cash or shares of common stock, at the Company's option.  This series
of preferred  stock does not provide for redemption  and is non- voting.  On May
31, 2004,  these 1,800 shares were returned to us as part of our  divestiture of
PGNF discussed above (See Notes 1 and 2).

At  December  31, 2005 and 2004,  we had 659 shares of Series E preferred  stock
issued and outstanding.

STOCK PURCHASE WARRANTS - As part of our convertible notes offering completed in
March 2003,  we issued  detachable  warrants to purchase up to 75,800  shares of
common stock at a rate of $0.25 per share.  The warrants are  exercisable  for a
period of three years. In 2005, the holders of our  convertible  notes agreed to
modify the  convertible  notes and extend the  maturity to December  31, 2006 as
well as reduce the interest rate on the convertible notes to 10% per \ annum. In
consideration  for the  modification,  we agreed to reduce the exercise price of
the warrants to $0.05 per share and extend the  exercise  period to December 31,
2006.

In February  2005, as part of an offering of units of our common stock and stock
purchase  warrants,  we issued  warrants to purchase an aggregate of  17,207,792
shares of our common stock at $0.04 per share. These warrants have an expiration
date of December 31, 2007.

In December 2005, we completed an offering of convertible debt with warrants. As
part of this offering,  we issued warrants to purchase  1,226,000  shares of our
common stock with exercise  prices of $0.04 and $0.05 per share.  These warrants
have an expiration date of December 31, 2007.

                                      F-23
<PAGE>






                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 8.         STOCKHOLDERS' DEFICIT (continued)

COMMON  STOCK - In February  2005,  we completed a private  placement  financing
transaction  pursuant  to  which  we  offered  to  accredited  investors  up  to
17,207,792  units at $0.0308 per unit with each unit  consisting of one share of
our common  stock,  par value  $0.0001 per share (the "Common  Stock"),  and one
warrant to purchase one share of our Common Stock at $0.04 per share expiring on
December 31, 2007. We sold 17,207,791 units to several accredited  investors for
an aggregate purchase price of $530,000.

In 2005, we issued 1,950,000  shares of restricted stock to various  consultants
at $0.05 per share.  These  shares  vest over three  years.  In 2004,  we issued
restricted and  unrestricted  shares of stock  totaling  1,146,000 for services,
insurance premiums, and fees at per share prices ranging from $0.04 to $0.07.

In December  2005, we entered into an Exchange  Agreement with the holder of two
of  our  promissory  notes,  totaling  approximately   $1,643,215  in  aggregate
outstanding  principal amount and accrued and unpaid interest into approximately
15,000,000  shares of our common  stock.  The exchange  price was  approximately
$0.05 per share. A gain in exchange of debt for equity of $894 was recorded.

On December  31, 2005,  we sold  333,333  shares of our common stock for $10, or
approximately $0.03 per share, to an accredited investor.

On January 19, 2005, we completed our acquisition of First Charleston  Mortgage,
LLC ("FCM"),  a South Carolina limited liability  company.  As consideration for
the  acquisition,  we issued  4,285,714  shares of our $0.0001 par value  common
stock  valued at $214 (or  $0.05 per  share).  FCM has been in the  business  of
originating  residential  mortgage loans since 2002 and focused primarily on the
brokering of conforming loans. Subsequently,  we agreed to rescind the agreement
with FCM and its  holders  effective  December  31,  2005.  As a result  of this
agreement,  3,500,785  shares  of  our  common  stock  were  returned  to us and
cancelled.

STOCK OPTIONS - In December 2002, the Company's  shareholders  approved the 2002
Equity  Participation  Plan (the "2002 Plan").  The maximum  number of shares of
common  stock that may be issued  pursuant  to options  or as  restricted  stock
granted  under  the 2002  Plan is one  hundred  million  shares.  The 2002  Plan
authorizes the granting of stock options,  restricted stock and stock bonuses to
employees,  officers,  directors and  consultants,  independent  contractors and
advisors of the Company and its  subsidiaries

Under SFAS 123,  the fair value of each option grant is estimated on the date of
grant  using  the   Black-Scholes   option-pricing   model  with  the  following
weighted-average  assumptions  for the years ended  December 31, 2005,  2004 and
2003:

                                      F-24
<PAGE>






                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 8.         STOCKHOLDERS' DEFICIT (continued)

                                                2005       2004     2003
                                                ----       ----     ----

Expected life of option                           4          4        4
Dividend yield                                    0%         0%       0%
Volatility                                       74%       136%      37%
Risk free interest rate                        4.41%      3.43%    2.89%

The weighted  average fair value of options granted to employees,  directors and
consultants  during the years  ended  December  31,  2005,  2004 and 2003 was as
follows:
<TABLE>
<CAPTION>
<S>                                                               <C>           <C>                 <C>

                                                                    2005              2004              2003
                                                                    ----              ----              ----
Fair value of each option granted                                  $   0.03     $      0.03          $    0.18
Total number of options granted                                   9,422,500      22,935,000         27,609,750
Total fair value of all options granted                            $    278     $       790           $  4,852
</TABLE>

Outstanding options, consisting of ten-year incentive options typically vest and
become  exercisable  over a  three-year  period  from  the  date of  grant.  The
outstanding  options expire ten years from the date of grant or upon  retirement
from the Company,  and their exercise is contingent  upon  continued  employment
during the applicable ten-year period.

A summary of the status of stock  option  grants as of December  31,  2005,  and
changes during the three years ending December 31, 2005, is presented below:

<TABLE>
<CAPTION>
<S>                                                              <C>               <C>

                                                                                     WEIGHTED
                                                                    NUMBER OF         AVERAGE
                                                                    OPTIONS          EXERCISE
                                                                                       PRICE
                                                                 ----------------  ---------------
     Outstanding at December 31, 2002                                38,451,750          $  0.19
     Granted                                                         27,609,750          $  0.47
     Exercised                                                                -                -
     Rescinded                                                     (15,000,000)          $  0.26
     Forfeited                                                     (10,322,750)          $  0.16
                                                                 ----------------
     Outstanding at December 31, 2003                                40,738,750          $  0.37
     Granted                                                         22,935,000          $  0.06
     Exercised                                                                -                -
     Forfeited                                                     (29,262,000)          $  0.31
                                                                 ----------------
     Outstanding at December 31, 2004                                34,411,750          $  0.21
     Granted                                                          9,422,500          $  0.07
     Exercised                                                                -                -
     Forfeited                                                     (15,590,000)          $  0.36
                                                                 ----------------

     Outstanding at December 31, 2005                                28,244,250          $  0.08
                                                                 ================

     Options exercisable at December 31, 2005                        11,880,084          $  0.10
                                                                 ================

</TABLE>

                                      F-25

<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 8.         STOCKHOLDERS' DEFICIT (continued)
<TABLE>
<CAPTION>
<S>                                             <C>                    <C>                  <C>

The following table summarizes information about stock options outstanding at December 31, 2005:
                                                                                            Remaining
                                                  Options                Options             Life In
     Exercise Price Range                       Outstanding            Exercisable            Years
     --------------------                       -----------            -----------            -----
     $0.04 - $0.06                              17,422,500              3,333,333              9.0
     $0.09 - $0.17                               9,648,000              7,488,001              7.3
     $0.17 - $0.26                               1,155,000              1,040,000              7.0
     $2.12 *                                        18,750                 18,750              4.8
                                                ----------             ----------
                                                28,244,250             11,880,084
                                                ==========             ==========
     * Granted by predecessor issuer
</TABLE>

DIVIDENDS  - In order to  maintain  compliance  with  certain  regulations,  the
Company's  subsidiary,  PHF, is restricted from paying  dividends or advances to
PFC that would cause PHF's minimum net worth to fall below $63 (see Note 9).

 NOTE 9.         COMMITMENTS AND CONTINGENCIES

Off-Balance  Sheet Risks - The Company enters into  commitments to extend credit
in the normal course of business. These commitments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount  recognized in
the  balance  sheet.  Commitments  to fund  loans  are  agreements  to lend to a
customer as long as there is no violation of any  condition  established  in the
contract. Commitments generally have fixed expiration dates or other termination
clauses.   One-to-four  family   residential   properties,   if  funded,   would
collateralize   the   commitments.   The  Company   evaluates  each   customer's
creditworthiness  and obtains  appraisals to support the value of the underlying
collateral.  Also,  external market forces affect the probability of commitments
being exercised;  therefore,  total  commitments  outstanding do not necessarily
represent  future  cash  requirements.  The  Company  quotes  interest  rates to
borrowers,  which are generally  subject to change by the Company.  Although the
Company typically honors such interest rate quotes, the quotes do not constitute
interest rate locks,  minimizing the potential interest rate risk exposure.  The
Company had no binding commitments to fund loans at December 31, 2005.

Supervisory Regulation - The Company's mortgage brokering business is subject to
the rules and  regulations  of the  Department of Housing and Urban  Development
("HUD") and various  state and federal  agencies  with  respect to  originating,
processing, and selling mortgage loans as a nonsupervised  correspondent lender.
Those rules and  regulations  require,  among other  things,  that the Company's
subsidiary,  PHF,  maintain a minimum net worth of $63. As of December  31, 2005
and 2004, PHF was in compliance with these  requirements.  The Company currently
does not hold for sale or service loans for other investors or federal agencies.

                                      F-26
<PAGE>





                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 9.  COMMITMENTS AND CONTINGENCIES (continued)

Minimum  Operating  Lease  Commitments  - The Company is party to leases for its
facilities  and certain  office  equipment.  The Company pays taxes,  insurance,
other operating  expenses,  and general  maintenance for all lease arrangements.
Rent expense for the years ended  December 31, 2005,  2004,  and 2003,  was $98,
$163, and $128,  respectively,  and included  facilities  rent of $84, $157, and
$121, respectively. Equipment rent for the same periods totaled $14, $6, and $7,
respectively.  The  minimum  rental  commitments  for lease  agreements  for the
Company's operating leases are as follows:

                         Year ending December 31:
                                   2006                    $           100
                                   2007                                 62
                                   2008                                 43
                                   2009                                 13
                                Thereafter                              13
                                                           $           231
                                                           ===============


Litigation - On September 24, 2004, the Company defaulted on its promissory note
dated June 4, 2003 to Bank of America,  N.A.  ("BoA") being unable to repay this
note in full when  demanded  to do so by BoA.  BoA has  commenced  legal  action
against us and other guarantors of the  indebtedness for repayment.  On December
13,  2004,  we entered  into a  standstill  agreement  with BoA  whereby,  for a
principal reduction payment of $25 and the payment of an extension fee and BoA's
legal fees,  the maturity date of the note was extended to December 1, 2005, the
interest  rate was  increased  to the bank's  prime  rate plus 4%, and  required
principal  reduction  payments  of $5 per month  through  November  1, 2005.  On
January  27,  2006,  we entered  into a second  standstill  agreement  with BoA,
effective  December  1, 2005,  wherein we paid a loan  extension  fee of $20 and
BoA's legal fees.  The  maturity  of the note was  extended to May 1, 2006,  the
interest  rate was increased to the bank's prime rate plus 5%, and the principal
reduction  fees were  increased to $10 per month through April 1, 2006. On March
1, 2006, we defaulted on the terms of the second standstill  agreement with BoA,
and this loan remains in default.

In mid-2001,  the Company, and certain of its former directors and officers were
named as  defendants  in class  action  complaints  alleging  violations  of the
federal  securities  laws in the United States  District  Court for the Southern
District of New York.  In  mid-2002,  the  complaints  against the Company  were
consolidated into a single action.

                                      F-27
<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 9.         COMMITMENTS AND CONTINGENCIES (continued)

The essence of the  complaint is that in connection  with the Company's  initial
public  offering in October 1999  ("IPO"),  the  defendants  issued and sold the
Company's  common  stock  pursuant  to a  registration  statement  which did not
disclose to investors  that certain  underwriters  in the offering had solicited
and received  excessive  and  undisclosed  commissions  from  certain  investors
acquiring the Company's  common stock in connection  with the IPO. The complaint
also  alleges  that the  registration  statement  failed  to  disclose  that the
underwriters   allocated   Company  shares  in  the  IPO  to  customers  of  the
underwriters  in exchange  for the  customers'  promises to purchase  additional
shares in the  aftermarket  at  pre-determined  prices above the IPO price.  The
action seeks damages in an unspecified  amount.  The action is being coordinated
with  approximately  300 other nearly  identical  actions  filed  against  other
companies that had initial public offerings of securities  between 1997 and 2000
same time period.

The Company  has  approved a  Memorandum  of  Understanding  ("MOU") and related
agreements  which set forth the terms of a settlement  between the Company,  the
plaintiff  class and the vast  majority  of the other  approximately  300 issuer
defendants.  Among other  provisions,  the  settlement  contemplated  by the MOU
provides  for a release of the Company  and the  individual  defendants  for the
conduct  alleged  in the  action to be  wrongful.  The  Company  would  agree to
undertake  certain  responsibilities,  including  agreeing to assign  away,  not
assert,  or release  certain  potential  claims the Company may have against its
underwriters.

It is  anticipated  that any  potential  financial  obligation of the Company to
plaintiffs  pursuant  to the  terms of the MOU and  related  agreements  will be
covered by existing insurance.  Therefore,  the Company does not expect that the
settlement will involve any payment by the Company.

The MOU and  related  agreements  are  subject  to a  number  of  contingencies,
including  the  negotiation  of a settlement  agreement  and its approval by the
Court. The Company cannot opine as to whether or when a settlement will occur or
be finalized.  Whether or not the settlement is ultimately approved, the Company
believes the  resolution of this matter will not have a material  adverse effect
on the Company.

The Court will hold a Settlement  Fairness  Hearing at 10:00 a.m.,  on April 24,
2006, at the United States District Court for the Southern District of New York,
500 Pearl  Street,  New York,  New York  10007.  At this  hearing the Court will
consider whether the Settlement is fair,  reasonable and adequate.  If there are
objections,  the Court will  consider  them.  After the hearing,  the Court will
decide whether or not to approve the  Settlement.  We cannot opine as to whether
or when a settlement  will occur or be finalized,  or whether the  settlement is
ultimately  approved.  We continue to believe the resolution of this matter will
not have a material adverse effect on the Company.

                                      F-28
<PAGE>






                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 9.         COMMITMENTS AND CONTINGENCIES (continued)

The  Company is also  party to  various  legal  proceedings  arising  out of the
ordinary course of business. Management believes that any liability with respect
to  these  legal  actions,  individually  or in the  aggregate,  will not have a
material  adverse effect on the Company's  consolidated  financial  position and
results of operations.

NOTE 10.       INCOME TAXES

Income tax expense  (benefit) from the Company's  continuing  operations for the
years ended December 31, 2005, 2004 and 2003 were as follows:

                                       2005          2004          2003
                                       ----          ----          ----
   Current:
       Federal                      $     -       $      -       $ (809)
       State                            (10)            42           13
                                     -------       -------       -------
                                        (10)            42         (796)
                                     -------       -------       -------
   Deferred:
       Federal                            -            414          (41)
       State                              -              -            -
                                     -------       -------       -------
                                          -            414          (41)
                                     -------       -------       -------

                                    $   (10)       $   456      $  (837)
                                     ========      =======      ========

The  components of the Company's net deferred tax assets as of December 31, 2005
and 2004 are as follows:

                                                    2005                 2004
                                                    ----                 ----
   Deferred income tax assets:
       Deferred salaries and benefits                 $     759     $       735
       Operating loss carryforwards                       1,803           1,462
       Reserves not currently deductible                     99              14
       Deferred organization costs                           34              68
                                                     -----------    ------------
                                                          2,695           2,279
   Deferred income tax valuation allowance               (2,679)         (2,263)
                                                       ---------       ---------

   Deferred income tax asset, net of valuation allowance     16              16

    Deferred income tax liabilities:
         Property and equipment                             (16)            (16)
                                                      ----------     -----------

                                                     $      ---      $      ---
                                                      ==========      ==========


                                      F-29
<PAGE>




                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 10.         INCOME TAXES (continued)

Recognition  of deferred tax assets is based on  management's  belief that it is
more likely than not that the tax benefit associated with temporary  differences
and operating  loss  carryforwards  will be utilized.  A valuation  allowance is
recorded for those  deferred  income tax assets for which it is more likely than
not that the realization will not occur (See Note 17).

Through  December 31, 2002, the Company was considered to be in the  development
stage and had incurred losses since inception.  Due to the uncertainty of future
taxable  income  during  its  development  stage,  no future tax  benefits  were
recognized. With the acquisitions completed in 2003, the Company was no longer a
development stage enterprise and deferred income tax assets and liabilities were
recognized  for the year ended  December  31, 2003.  While the Company  suffered
losses in 2005, 2004, and 2003, in management's  opinion,  the Company has taken
steps to generate future taxable income believed to be sufficient to recognize a
portion of the deferred income tax assets.

Subsequent  to the years ended  December  31, 2005 and 2004,  we  determined  to
reduce  the  carrying  value of  deferred  tax  assets to $0 by  increasing  the
deferred tax  valuation  allowance  $414 in 2004 (see Note 17). We restated 2005
income tax  benefit to reflect  $10 of income tax  refunds  that was part of the
2004 restatement.

Our net  valuation  allowance at December 31, 2005,  consisted of $1,803 for net
operating loss carryforwards,  $759 for deferred salaries and benefits, and $117
for other.

As of December 31, 2005, we have federal and state NOLs providing a tax effected
benefit of $1,803.  The NOLs expire in varying  amounts in fiscal  years 2022 to
2024.

The  following  reconciles  the  income  tax  expense  computed  at the  federal
statutory  income tax rate to the  provision  for income  taxes  recorded in the
Consolidated  Statements  of Operations  for the years ended  December 31, 2005,
2004 and 2003:
<TABLE>
<CAPTION>
<S>                                                                <C>                       <C>    <C>

                                                                    2005         2004          2003
                                                                    ----         ----          ----
   Income tax benefit at statutory federal rate                      35.0%      35.0%         (35.0)%
   State and local income tax (benefit), net of federal               2.5%       3.9%           2.5%
   Effect of non-deductible items                                    (7.6)%      0.1%           3.1%
   Valuation allowance and other, net                               (19.9)%    (15.0)%         (3.9)%
                                                                    -------     -------         ------

   Effective benefit rate                                            10.0%      24.0%         (33.3)%
                                                                   ========     ======       =========

</TABLE>

                                      F-30

<PAGE>







                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 11.       NON-RECURRING CHARGES

During 2005, we recorded  non-recurring  charges of $80, which included $31 from
the issuance of 784,929  shares of our common stock from the  rescission  of the
FCM  acquisition  and relocation  expenses of $49 for our former chief executive
officer.

During 2004, we expensed certain  investment banking fees and other costs of $25
associated with a failed financing effort. In 2003, the Company expensed certain
amounts  that  were  considered  non-recurring,  which  included  severance  and
employment related expense of $240 and costs related to raising capital of $93.

NOTE 12.       UNAUDITED QUARTERLY RESULTS

Set forth below is certain  unaudited  quarterly  financial data for each of our
last eight quarters.  The information has been derived from unaudited  financial
statements  that,  in  the  opinion  of  management,   include  all  adjustments
(consisting  only of normal recurring  adjustments)  necessary to fairly present
such quarterly  information in accordance  with  generally  accepted  accounting
principles. The operating results for any quarter are not necessarily indicative
of the results to be expected for any future period.

We rescinded  our member  purchase  agreement  with the former  members of First
Charleston  Mortgage,  LLC ("FCM"). The unaudited quarterly financial data below
for the first, second and third quarters in the twelve months ended December 31,
2005 have been restated to reflect the rescission of the FCM agreement.

                                      F-31
<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 12.       UNAUDITED QUARTERLY RESULTS (continued)
<TABLE>
<CAPTION>
<S>                              <C>           <C>          <C>           <C>

                                    First        Second        Third         Fourth
                                   Quarter       Quarter      Quarter        Quarter
                                   -------       -------      -------        -------
Revenue                          $   249       $    383     $    479      $       391
Total operating expenses         $   452       $    497     $    638      $       742
Operating loss                   $  (203)      $   (114)    $   (159)     $      (351)
Interest expense                 $    48       $     46     $     46      $        27
Other income                     $     -       $      -     $      -      $       894
Net income (loss)                $  (251)      $   (160)    $   (205)     $       516
Basic and diluted income (loss)
    per share                    $ (0.00)      $  (0.00)    $  (0.00)     $      0.01

                                        Year Ended December 31, 2004 (Unaudited)
                                        (in thousands, except per share amount)
                                    First        Second        Third         Fourth
                                   Quarter       Quarter      Quarter        Quarter
                                   -------       -------      -------        -------
Revenue                          $   582       $   637        $  479       $   336
Total operating expenses         $ 1,043       $   816        $  549       $ 1,304
Interest expense                 $    18       $    25        $   41       $    23
Loss on disposal of segment      $     -       $   102        $    -       $    15
Loss from continuing operations  $  (479)      $  (306)       $ (111)      $(1,462)
Net loss                         $(3,352)      $  (972)       $ (111)      $(1,462)
Basic and diluted loss per share $ (0.03)      $ (0.01)       $(0.00)      $ (0.03)

                                        Year Ended December 31, 2003 (Unaudited)
                                        (in thousands, except per share amount)
                                    First        Second        Third         Fourth
                                   Quarter       Quarter      Quarter        Quarter
                                   -------       -------      -------        -------
Revenue                          $   270       $   545      $    656         $   493
Total operating expenses         $   571       $ 1,072      $  1,031         $ 1,392
Interest expense                 $   109       $   100      $    104         $   102
Loss from continuing operations  $  (410)      $  (627)     $   (479)        $(1,001)
Net loss                         $  (923)      $  (281)     $    (84)        $  (109)
Basic and diluted loss per share $ (0.01)      $ (0.00)     $  (0.00)        $ (0.00)

</TABLE>

                                      F-32
<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

N0OTE 13.        SEGMENT DATA

Previously, we operated in two separate business segments: wholesale and retail.
With the disposal of PGNF (Note
2), we currently operate in one business segment: retail mortgage brokering.


NOTE 14.       SUPPLEMENTAL CASH FLOW INFORMATION

We have  revised  our 2004  and 2003  Consolidated  Statements  of Cash  Flow to
separately  disclose the  operating,  investing and  financing  portions of cash
flows attributable to our discontinued  operations.  We had previously  reported
2004 and 2003 amounts on a combined basis.

<TABLE>
<CAPTION>
<S>                                                       <C>          <C>          <C>

                                                              2005         2004         2003
                                                              ----         ----         ----
Supplemental Cash Flow Data:
    Cash interest received                                 $        -  $         -   $   1,649
                                                          ============ ============ ============
    Cash interest paid                                     $       43  $         -   $   1,674
                                                          ============ ============ ============
    Income taxes paid (received)                           $      (10) $         5   $      35
                                                          ============ ============ ============

Non-cash investing and financing activities:
    Issuance of stock for settlement of obligations and
        payment for services rendered                      $      958  $       232   $        -
                                                          ============ ============ ============

Acquisitions of businesses, net of cash acquired:
     Fair value of assets acquired                         $        -  $         -   $  (26,931)
     Goodwill                                                       -            -       (8,636)
     Liabilities assumed                                            -            -       26,761
     Note issued                                                    -            -        1,800
     Stock issued                                                   -            -        7,203
                                                            ----------  -----------   ----------
     Cash acquired in purchases of businesses              $        -  $         -   $      197
                                                          ============ ============ ============

</TABLE>

                                      F-33

<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)


NOTE 15.       OTHER RELATED PARTY TRANSACTIONS

The Company has entered into  employment  agreements with certain of its current
and former  executive  officers.  These executive  officers had elected to defer
receipt of the salaries,  related  benefits and other items due them pursuant to
such contracts until the Company acquired  sufficient  operating capital through
the  acquisition  of operating  companies,  raising of debt or equity capital or
both.  At December  31,  2002,  the Company had accrued  $666  pursuant to these
contracts.  Subsequent to December 31, 2002,  the Company's  executive  officers
converted  $659 of  such  accrued  compensation  due to  them  to  newly  issued
preferred  shares.  (See Note 8). On  December  20,  2005,  we  entered  into an
Exchange Agreement with Matthew Robinson ("Robinson"),  an existing shareholder.
and currently an employee,  in which Robinson  exchanged two  promissory  notes,
totaling  approximately  $1,643 in aggregate  outstanding  principal  amount and
accrued and unpaid interest as of December 20, 2005,  into 15,000,000  shares of
our common stock,  or  approximately  $0.11 per share. On December 20, 2005, the
closing price as quoted on the OTC Bulletin Board was $0.05 per share.

At  December  31,  2005,  promissory  notes  payable  in the  amount of $25 were
outstanding  from the  acquisition  of PHF,  bearing an interest  rate of 4.92%,
payable December 31, 2005, currently in default.

NOTE 16.       SUBSEQUENT EVENTS

On February 2, 2006, we completed a private placement  financing  transaction to
an  accredited  investor in order to have the capital  necessary to complete the
SHL  acquisition.  Pursuant to this  private  placement  transaction,  we issued
2,625,000  units at $0.04 per unit for an aggregate of $105. Each unit consisted
of one share of our common  stock,  par value  $0.0001  per share  (the  "Common
Stock"),  and one warrant to purchase one share of our Common Stock at $0.06 per
share expiring on February 1, 2008.

On February 3, 2006,  we agreed to exchange all 659 shares of Series E Preferred
stock outstanding, including accumulated dividends due on the Series E Preferred
for 7,239,751  unregistered  shares of our common  stock,  par value $0.0001 per
share.  The value of our common stock  issued in the exchange was  approximately
$434 based upon the closing  price of $0.06 per share.  The stated  value of the
Series E Preferred Stock was $659 and the accumulated dividend was approximately
$75.

On February 3, 2006, we agreed to exchange 3,033,310  unregistered shares of our
common stock,  par value $0.0001 per share to cure a default under our agreement
for severance due a former Chief  Executive  Officer of  approximately  $84. The
effective exchange rate was approximately $0.0277 per share.

                                      F-34
<PAGE>





                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 16.       SUBSEQUENT EVENTS

On February 3, 2006, we exchanged  6,187,835  unregistered  shares of our common
stock,  par value  $0.0001 per share,  for the  27,047,583  outstanding  options
issued to our  employees  and  consultants  under our 2002 Equity  Participation
Plan.

On February 7, 2006, we agreed to exercise the termination  provisions contained
in Section 11(a)(i) of the Purchase  Agreement  entered into on January 19, 2005
with the Members of First Charleston Mortgage,  LLC. Pursuant to this agreement,
we returned to the Members all of the membership  interests in First  Charleston
Mortgage,  LLC in  exchange  for the  return of  3,500,785  shares of our common
stock, par value $0.0001 per share. For accounting convenience,  this rescission
was effective at the close of business on December 31, 2005.

On February 7, 2006, we agreed to acquire  Shearson  Home Loans,  Inc., a Nevada
corporation ("SHL"), from Consumer Direct of America, Inc. ("CDA"),  pursuant to
the terms and  conditions of a Share Exchange  Agreement  dated February 7, 2006
(the  "Exchange  Agreement")  among CDA,  SHL and us.  Pursuant to the  Exchange
Agreement,  we acquired all of the common stock of SHL for 149,558,791 shares of
our common stock and 79 shares of our Series F Preferred Stock (convertible into
443,217,018 shares of our Common Stock),  valued at approximately  $16,000. Each
share of the Series F Preferred  Stock  automatically  converts  into  5,610,342
shares of our common  stock upon the filing of an  amendment  to our articles of
incorporation.

On March 21, 2006,  subject to the filing of an  application  with certain state
regulatory  agencies,  we agreed to acquire  all of the  issued and  outstanding
shares of common stock of eHOMECREDIT  CORP.  ("EHC"),  a New York  corporation,
from its  shareholders  ("Shareholders"),  pursuant  to the  terms,  conditions,
representations   and  warranties  of  a  Share  Exchange  Agreement  (the  "EHC
Agreement") among  Shareholders,  EHC and us. Pursuant to the EHC Agreement,  we
agreed to exchange 1,000,000 shares of our Series G Preferred Stock (convertible
into  100,000,000   shares  of  our  common  stock),   valued  at  approximately
$7,000,000, for all of the outstanding shares of EHC. Each share of the Series G
Preferred Stock automatically  converts into 100 shares of our common stock upon
the filing of an amendment to our articles of  incorporation.  Immediately prior
to entering  into the EHC  Agreement,  we had  271,750,151  shares of our common
stock outstanding.  EHC is a leading mortgage banker with headquarters in Garden
City, New York, and is licensed to lend in 40 states.

                                      F-35
<PAGE>



                 PARAGON FINANCIAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)

NOTE 17. RESTATEMENT

In connection with a Comment Letter received by the Company in 2006, the Company
determined  that the  consolidated  financial  statements  for the  years  ended
December 31, 2005 and 2004 should be revised in light of such comment letter and
changes in the Company's operational activities subsequent to December 31, 2004.
As a result,  the Company took an impairment  charge of $822 in connection  with
the value of its  goodwill,  and adjusted  its  deferred  tax assets  through an
increase in the deferred tax valuation  allowance of an additional $414, leaving
the carrying  value of deferred tax assets at $0. Both the net loss for 2004 and
stockholders'  deficit  as of  December  31,  2004  were  increased  by  $1,236.
Accordingly,  total  consolidated  assets at December  31, 2004 were  reduced by
$1,236.

The  stockholders'  deficit at  December  31,  2005 was  increased  by $1,226 to
reflect  the  cumulative  effect  of the 2004  restatement  offset by $10 of the
deferred tax valuation  adjustments  previously  reported in 2005.  Accordingly,
total consolidated assets at December 31, 2005 were reduced by $1,226.

As a result, we are restating our previously issued consolidated  balance sheets
as of December 31, 2005 and 2004, and the consolidated statements of operations,
comprehensive loss,  stockholders'  deficit,  and cash flows for the years ended
December 31, 2005 and 2004, and the related footnotes thereto, principally Notes
1, 5, and 10.

                                      F-36

<PAGE>



                                   SIGNATURES

Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities  Act of
1934,  the  Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.



                                              Paragon Financial Corporation
                                             (kna NewMarket Latin America, Inc.)

                                                /s/ AUBREY BROWN
                                                --------------------------------
                                                Aubrey Brown
                                              Chairman & Chief Executive Officer

                                                Dated: October 22, 2008


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

             Signature                          Title                 Date
             ---------                          -----                 ----

/s/Aubrey Brown                      Chief Executive Officer   October 22, 2008
---------------
Aubrey Brown

/s/Philip J. Rauch                  Chief Financial Officer    October 22, 2008
------------------                  and Director
Philip J. Rauch

/s/Philip Verges                    Director                   October 22, 2008
---------------
Philip Verges

/s/Bruce Noller                     Director                   October 22, 2008
---------------
Bruce Noller


                                       48