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UNITED STATESSECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

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FORM 10-KSB








| |                                                                                      | 
| | ------------------------------------------------------------------------------------ | 
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | 
| | For the fiscal year ended December 31, 2005                                          | 
| |                                                                                      | 

Commission File Number: 000-30949

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PHOENIX INTERESTS, INC. One RIVERPOINT PLAZA, SUITE 706JEFFERSONVILLE, IN 47130(502) 584-4434


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|                       |  |                                             
|---------------------- |  | --------------------------------------------
|                       |  |                                             
|Incorporated in Nevada |  | I.R.S. EmployerIdentification No. 61-1342734

Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, par value $0.001 per share

Indicate  by check mark  whether
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  twelve  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.
Yesý
      
No ̈

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB  ̈Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-2 of the Exchange Act)
Yes ̈
      Noý


   Registrants revenues for its most recent fiscal year (ended December 31, 2005):
$26,234
   Aggregate market value of voting stock held by non-affiliates: N/A

   Indicate the number of shares outstanding of each of the Registrants classes of common stock:


   142,024,521 common shares were outstanding as of April 21, 2006.

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|PHOENIX
INTERESTS, INC.(formerly Thoroughbred Interests, Inc.)
|--------------------------------------------------------------
|FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005       

# 

# TABLE
OF CONTENTS

|PART I                | Page                                                                                                           
|--------------------- | ---------------------------------------------------------------------------------------------------------------
|                     
|Item 1.               | Description of Business.                                                                                       
|                     
|Item 2.               | Description of Property.                                                                                       
|                     
|Item 3.               | Legal Proceedings.                                                                                             
|                     
|Item 4.               | Submission of Matters to a Vote of Security Holders.                                                           
|                     
|PART II              
|                     
|Item 5.               | Market For Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.
|                     
|Item 6.               | Managements Discussion and Analysis or                                                                        
|                      | Plan of Operations.                                                                                            
|                     
|Item 7.               | Financial Statements.                                                                                          
|                     
|Item 8.               | Changes In and Disagreements With Accountants on Accountingand Financial Disclosure.                           
|                     
|Item 8a.              | Controls and Procedures.                                                                                       
|                     
|PART III              |                                                                                                                
|                     
|Item 9.               | Directors and Executive Officers of the Registrant.                                                            
|                     
|Item 10.              | Executive Compensation.                                                                                        
|                     
|Item 11.              | Security Ownership of Certain Beneficial Owners                                                                
|                      | and Management and Related Stockholder Matters.                                                                
|                     
|Item 12.              | Certain Relationships And Related Transactions.                                                                
|                     
|Item 13.              | Exhibits.                                                                                                      
|                     
|Item 14.              | Principal Accountant Fees and Services.                                                                        
|                     
|Signatures.           |                                                                                                                
|                     
|Financial Statements. | F-1                                                                                                            
|                     

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Table of Contents

PART
I

ITEM 1.   DESCRIPTION
OF BUSINESS

GENERAL INFORMATION

Phoenix Interests, Inc. is a reporting company under the federal securities laws. Our shares of common stock are publicly traded on the Over-the-Counter Bulletin Board (OTCBB) under the symbol PXIT. We were organized under the laws of Nevada on March 25, 1999.

Our business had been purchasing, training, and selling thoroughbred horses, but on December 31, 2003, we elected to discontinue our operations and instead to focus our business on investing in small, cash-flow-positive businesses across a range of industries, the initial focus being the gaming and entertainment industries. We intended to make strategic investments in start-up, development-stage, and, in certain circumstances, distressed companies that are able to make use of new technologies and demonstrate creative thinking. Potential candidates for investment included old-line businesses such as racetracks and other traditional gaming properties, as well as online opportunities, including account-wagering projects. We were focusing our efforts on those companies in a position to capitalize on the continuing expansion of the Internet and the flow of information across traditional barriers and borders. In principle, we preferred to make investments in companies where we could acquire at least a 51% ownership interest in the outstanding capital of the portfolio company.

Consistent with this business plan, on January 20, 2004, we filed a Form N-54 with the Securities and Exchange Commission (SEC) indicating that we wish to be regulated as a business development company under the Investment Company Act of 1940. One reason for so doing is that our proposed operating model best approximates that of an investment company. As a business development company, we were required to have at least 70% of our assets in eligible portfolio companies.

Additionally, our status as a business development company allowed us to raise the additional capital necessary to allow us to implement our new business plan, in that business development companies are permitted to issue in any 12-month period, without registration under the Securities Act of 1933, shares with an aggregate offering price of up to $5 million. Consequently, on January 20, 2004, we filed a Form 1-E under the Securities Act notifying the SEC of our intent to sell under this exemption up to $5,000,000 of our common stock. On November 26, 2004, we filed a Form 2-E terminating our offering under that Form 1-E and filed a new Form 1-E.  On May 9, 2005, we filed a Form 1-E under the Securities Act notifying the SEC of our intent to sell under this exemption up to $5,000,000 of our common stock. On February 16, 2006, we filed a Form 2-E terminating our offering under that Form 1-E.

On March 31, 2006, we withdrew our election to be regulated as a business development company.

During 2004, we formed a wholly owned subsidiary, Online Enterprises, Inc., which launched www.Barn66.com. This website is an online thoroughbred-listing service for the industry. The site allows users from around the world to buy and sell thoroughbreds privately, as well as promote public consignment sales. In addition to accepting listings of thoroughbreds, users can list for sale other industry-related services and products. During 2005, we began offering free listings as a way to promote use of the site.

During 2005, we launched www.BetBarn66.com. This website is a member of the AmericaTab affiliate system; AmericaTab is a United States based wagering service that is owned and operated by racetracks and licensed to operate by the Oregon Racing Commission.

These websites were representative of the kinds of transactions we expected to engage in as a business development company.

In January of 2006, AmericaTab notified us that it was ending its affiliation by serving a six-month notice.  We are exploring entering into an agreement to sell our customer base to either AmericaTab or others.  We are also considering partnering with other wagering firms.

Our business address is One RiverPoint Plaza, Suite 706, Jeffersonville, Indiana 47130, and our telephone number is (502) 584-4434.

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RISK FACTORS

We are subject to various risks that may materially harm our business, financial condition and results of operations. If any of these risks or uncertainties actually occurs, the trading price of our common stock could decline and you could lose all or part of your investment.

We have historically lost money, and our losses may continue in the future

We have historically lost money. As of December 31, 2005, we had had an accumulated deficit of $(5,637,599). Further such losses are likely to occur in the future, and we may experience significant liquidity and cash flow problems if we are not able to raise additional capital as needed and on acceptable terms. We can give no assurances that we will be successful in reaching or maintaining profitable operations.

We will need to raise additional capital to finance operations

We have relied almost entirely on external financing to fund our operations. This financing has historically come from a combination of borrowings and from the sale of common stock and assets to third parties. We will need to raise additional capital to fund our anticipated operating expenses and future expansion. Among other things, external financing will be required to cover our operating costs. We cannot assure you that financing, whether from external sources or related parties, will be available if needed or on favorable terms. The sale of our common stock to raise capital may cause dilution to our existing shareholders. Our inability to obtain adequate financing will result in the need to curtail business operations. Any of these events would be materially harmful to our business and may result in a lower stock price.

There is substantial doubt about our ability to continue as a going concern due to recurring losses and working capital shortages

The report of our independent accountants on our December 31, 2005, financial statements includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to recurring losses and working capital shortages. Our ability to continue as a going concern will be determined by our ability to obtain additional funding.

Our common stock may be affected by limited trading volume and may fluctuate significantly

There has been a limited public market for our common stock, and we can give no assurances that an active trading market for our common stock will develop. The lack of an active trading market could adversely affect our shareholders ability to sell our common stock without delay, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations that could adversely affect the market price of our common stock regardless of our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. Substantial fluctuations in our stock price could significantly reduce the price of our stock.

Our common stock is traded on the Over-the-Counter Bulletin Board, which may make it more difficult for investors to resell their shares due to suitability requirements

Our common stock is currently traded on the Over-the-Counter Bulletin Board (OTCBB), where we expect it to remain for the foreseeable future. Broker-dealers often decline to trade in OTCBB stocks because the market for such securities is often limited, the stocks are more volatile, and the risks to investors are greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to find buyers for their shares. This could cause our stock price to decline.

We could lose the services of our chief executive officer

Our future success depends, in significant part, on the continued services of James D. Tilton, Jr., our chief executive officer. Our loss of his services could adversely affect our ability to develop our business plan. We do not have an employment agreement with Mr. Tilton, nor do we currently maintain key-man life insurance policies on him.

Nevada law and our articles of incorporation may inhibit a takeover of our company that stockholders may consider favorable.

Provisions of Nevada law, such as its business combination statute, may have the effect of delaying, deferring, or preventing a change in control of our company. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.

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Our officers and directors have the ability to exercise significant influence over matters submitted for stockholder approval and their interests may differ from other stockholders

Our executive officers and directors, in the aggregate, have the ability to nominate two members to our board of directors. Accordingly, our directors and executive officers, whether acting alone or together, may have significant influence in determining the outcome of any corporate transaction or other matter submitted to our board of directors for approval, including issuances of common and preferred stock and the appointment of officers. This influence could make it more difficult for someone to acquire us.

ITEM 2.
DESCRIPTION OF PROPERTY.

Our executive and administrative office is located at One RiverPoint Plaza, Suite 706, Jeffersonville, Indiana 47130.  These premises are owned by James D. Tilton, Jr., our chief executive officer.  Through June 30, 2003, he did not charge the company any rent for our use of these premises.  Starting July 1, 2003, he has charged the company $1,250 per month for its use of these premises, and during 2005 increased it to $1,500 per month.

ITEM 3. LEGAL
PROCEEDINGS.

As
of December 31, 2005, and as of the date of this filing, the Company is not a party to
any pending or threatened litigation,  claim or assessment.

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

No
matters were submitted for shareholder approval during the forth quarter of the fiscal
year covered by this Report.

PART II.

ITEM 5. MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

A limited public market for our common stock exists on the NASDAQ Bulletin Board under the symbol PXIT.

The following table sets forth the range of high and low closing prices for our common stock for each quarterly period indicated, as reported by brokers and dealers making a market in the capital stock. Such quotations reflect inter-dealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions. Our common stock commenced trading on November 30, 2001.

|                                      | High |  | Low
|------------------------------------- | ---- |  | ---
|                                      |      | 
|For the year ended December 31, 2005: |      |  |    
|Fourth quarter                        |      |  | $  
|Third quarter                         |      |  | $  
|Second quarter                        |      |  | $  
|First quarter                         |      |  | $  
|                                      |      | 
|For the year ended December 31, 2004: |      |  |    
|Fourth quarter                        |      |  | $  
|Third quarter                         |      |  | $  
|Second quarter                        |      |  | $  
|First quarter                         |      |  | $  

As
of April 21, 2006, there were approximately 100 record holders of our common stock.

We have not paid any cash or other dividends on our common stock since our company was formed and we do not anticipate paying any such dividends in the foreseeable future. We intend to retain any earnings to use in our operations and to finance the expansion of our business.

SALES OF UNREGISTERED SECURITIES

None.

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Table of Contents

ITEM 6.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

This Annual Report on Form 10-KSB and the information incorporated by reference may include forward-looking statements within the meaning of Section 27(a) of the Securities Act and section 21(e) of the Exchange Act. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any forward-looking statements.

The following discussion should be read in conjunction with Phoenix Interests financial statements and the related notes included in this Form 10-KSB included elsewhere in this Annual Report.

Overview

Phoenix Interests, Inc. was incorporated under the laws of the State of Nevada in 1999.  Following its incorporation, Phoenix Interests entered into the pinhooking and racing of thoroughbred horses.  To date, substantially all of Phoenix Interests revenues have been generated from the pinhooking of thoroughbred horses.

During 2003, we discontinued all pinhooking activities and liquidated our remaining horse inventory. Going forward, we expect to generate revenues and profits when applicable from its investments in online account wagering, gaining and other various forms of legalized gambling. In March 2004, we formed a wholly owned subsidiary Online Enterprises, Inc. as its initial entry into online account wagering and ecommerce. Specifically, via our subsidiary Online Enterprises, Inc. we developed web sites http://www.Barn66.com and http://www.BetBarn66.com, which will allow users online to conduct live thoroughbred ecommerce and account wagering. The sites went live during November 2004 and January 2005, respectively. We are able to offer account wagering because of the affiliation we made in October 2004 with AmericaTab Ltd., an account wagering firm founded in 1999 and approved by the State of Oregon.  During 2005, Barn66.com produced nominal revenue and we elected to offer its services for free to increase usage.  BetBarn66.com produced revenue and showed growth during peak usage times.  In January of 2006, AmericaTab notified us that it was ending its affiliation by serving a six-month notice.  We are exploring entering into an agreement to sell our customer base to either AmericaTab or others.  We are also considering partnering with other wagering firms.

Critical Accounting Policies

Accrued Derivative Liability - The convertible debenture and the Series A, D and E preferred stock can be converted into common stock at a conversions price that is a percentage of the market price; therefore the number of shares that could be required to be delivered upon net-share settlement is essentially indeterminate.  In accordance with SFAS No. 133, we have bifurcated the beneficial conversion features embedded in our convertible debentures and preferred stock and have recorded the fair value of these beneficial conversion features as a current liability.

Convertible Preferred Stock - Our Series A, D and E preferred stock are presented as a current liability since we have financial instruments that are convertible into common stock at a conversions price that is a percentage of the market price; therefore the number of shares that could be required to be delivered upon net-share settlement is essentially indeterminate and we do not have enough authorized shares to satisfy the conversion of our convertible preferred stock.

Revenue Recognition - Revenue is recognized at the time a bet is placed on our online website.

Restatement of Prior Year Financial Statements

We have restated our previously issued 2004 consolidated financial statements for matters related to the following previously reported items: properly reflect the accounting for convertible notes, convertible preferred stock and the bifurcation of the related derivative liability pursuant to EITF Nos. 00-19, 05-02, 05-04 and SFAS No. 133; and the related income tax effects.  The consolidated financial statements for 2004 have been restated to reflect the corrections.

The net loss for 2004 was originally $1,159,857, while the 2004 restated net loss is reported as $1,078,294, a decrease in net loss of $81,563.  This decrease in net loss related to the decrease in the accrued derivative liability.

On the 2004 balance sheet, the restatement resulted in an increase in current liabilities of $2,751,502 consisting of the following:  1) the recording of the accrued derivative liability of $1,205,602 and 2) the reclassification of the Series A, D and C convertible preferred stock to a current liability which amounted to $1,545,900.  In addition total stockholders deficit increased by $2,751,502 due to recording the beneficial conversion feature of the convertible debt and convertible preferred stock as a current liability and the reclassification of the Series A, D and E preferred stock as a current liability.

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Operating Results
for the Year Ended December 31, 2005 and 2004

Revenues.     
Our revenues for the year ended December 31, 2005 were $26,234 as compared to $0 for the same period in 2004.  Our revenue come our Online Enterprises subsidiary which opened its web site for betting in 2005.

Operational
Expenses.     
Our operational expenses for the year ended December 31, 2005 were $761,421 compared to $705,916 for the same period in 2004. The increase in operational expenses is primarily due to a decrease in compensation offset by an increase in professional fees and office expenses.

Other Income (Expense).     
Our interest expense and financing costs for the year ended December 31, 2005 was $42,695 compared to $457,577 during the same period in 2004. The decrease in the interest expense and financing costs is the result of the amortization of the beneficial conversion features for convertible debentures issued in early 2004 and a decrease in debentures outstanding.

Change in accrued derivative liability for the year ended December 31, 2005 was $185,554 compared to $81,563 during the same period in 2004.  The increase is due to the reduction in the liability due to the conversion of debentures and preferred stock during 2005.

Net Income (Loss).     
Our net loss for the year ended December 31, 2005 was ($592,328) compared to ($1,078,294) for the same period in 2004. The decrease in the net loss is due to lower compensation, and amortization of the beneficial conversion feature.

Changes In
Balance Sheet.     
At December 31, 2005 we had current assets of $25,705 as compared to $306,659 at December 31, 2004, total assets of $99,011 at December 31, 2005 as compared to $367,985 at December 31, 2004, total liabilities of $3,890,599 at December 31, 2005 as compared to $3,456,426 at December 31, 2004 and stockholders equity (deficit) at December 31, 2005 of ($3,791,588) as compared to ($3,088,441) at December 31, 2004. The decrease in current and total assets is the result of paying for operational expenses. The increase in total liabilities is the result of the increase in convertible preferred stock which is shown as a current liability.

Liquidity, Capital Resources and Cash Requirements.     
During the year ended December 31, 2005 net cash used in operating activities for the period was $762,081 which was principally used to fund our loss from operations. Net cash used for investing activities was $38,842 which was due to the investment in our web site and purchase of equipment. Net cash provided by financing activities was $518,051, principally a result of us selling shares of Series E preferred stock for $440,000 and shares of common stock for $115,000.

As a result of the above, as of December 31, 2005, we had a cash position of $23,787.

We have historically financed our operations via convertible-debt and preferred-stock financing obtained from various private equity firms. These funds intend, over time, to convert their positions into shares of our common stock. This will cause significant dilution to existing shareholders.

In the immediate future, we have no commitments or plans to finance our business.  We intend to seek a merger with a larger operational enterprise, or partnering with another account wagering industry company.

Change in
Number of Employees

The Company in 2006 may hire additional employees depending upon the direction and nature of its ongoing business operations.

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ITEM 7.
FINANCIAL STATEMENTS.

The
financial statements of Phoenix Interests, Inc., including the notes thereto and the
report of independent accountants  thereon, commence at page F-1 of this Report.

ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 8a.
CONTROLS AND PROCEDURES.

Based on his evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2005, our Chief Executive Officer has concluded that our disclosure controls and procedures are effective and sufficient to ensure that we record, process, summarize and report information required to be disclosed by us in our periodic reports.

Subsequent to the date of his evaluation, there have not been any significant changes in our internal controls or in other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.

PART III

ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.

(a)   The
following table sets forth the name, age and position with the Company of each officer
and director of the Company as of  the date of this report.

|Name                 | Age |  | Position
|-------------------- | --- |  | --------
|                     |     | 
|James D. Tilton, Jr. |     |  | 45      
|                     |     | 
|Hiram Woo            |     |  | 70      
|                     |     | 
|Peter Klamka         |     |  | 37      

BIOGRAPHICAL INFORMATION

James D. Tilton, Jr., has served as chairman of our board of directors, chief executive officer, president, secretary, treasurer and sole director since we were formed. Mr. Tilton has more than 10 years experience in the securities industry. From 1995 to 1996, he was a stockbroker at Morgan Keegan. From 1997 to 1999, he worked independently in the securities industry, specializing in corporate finance and investment banking. Mr. Tilton has been involved in the financing of private and public small-growth companies. Since January 1999, Mr. Tilton has also been TuneIn Media, Inc.s chief executive officer and president. TuneIn Media, Inc. was an interactive media content provider and currently is a dormant company. Mr. Tilton formally resigned this position in October of 2005.  Mr. Tilton is currently a director of Girasolar (OTCBB: GRSR).  Mr. Tilton has a B.A. in Political Science with an emphasis in Accounting/Business from the University of Louisville.

Hiram Woo is a self-employed certified public accountant licensed in the State of California. From 1985 through 1997, Mr. Woo was president of Regal Financial & Development Corporation, a real-estate development and planning firm. While at Regal Financial & Development Corporation, Mr. Woo was responsible for acquisitions, feasibility analyses, financing, and the overall coordination of all development and construction projects with an emphasis on residential single family homes and multiple residential units. Mr. Woo managed over $300 million of real estate development projects in the Western United States under this entity. Mr. Woo has broad experience in accounting, taxes, and management advisory services, actively practicing in his mid-size CPA firm for a period of ten years. Mr. Woo had been the president and a director of Steakhouse Partners, Inc. (SIZLQ.PK), an operator of up to 65 full-service steakhouse restaurants located in 11 states since January 1997. On February 15, 2002, Steakhouse Partners, Inc. filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. Mr. Woo is a member of the board of directors of New Frontier Media, Inc. (NASDAQ: NOOF). Mr. Woo graduated from the University of California-Berkeley with a Bachelor of Science Degree in Accounting and Finance.

Peter Klamka has been the chairman of the board and chief executive officer of Legend Mobile, Inc. (OTCBB:LGMB.OB) since its inception in May 1997. Through its subsidiary Legend Credit, Inc., Legend Mobile develops and markets stored value cards. Mr. Klamka has been active in creating, marketing and developing various licensed products. He has also bought and sold several businesses, including Sunset Interactive Network Inc., which was sold to American Sports History Inc. (OTCBB: AMSH), and General Display Devices Inc., which was sold to Daktronics Inc. (NASDAQ: DAKT). In 1994, Mr. Klamka founded Wilshire Fragrance and served as its chief executive officer. Mr. Klamka is Chairman and Chief Executive Officer of Girasolar (OTCBB: GRSR).  Mr. Klamka received his Bachelor of Arts degree from the University of Michigan.

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CODE OF ETHICS

Our board of directors had adopted a code of ethics applicable to persons at our company who are responsible for financial management. A copy of the code of ethics is attached to this Annual Report as Exhibit 14.1.

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors acts as our audit committee. No member of our board of directors is an audit committee financial expert, as that term is defined in Item 401(e) of Regulation S-B promulgated under the Securities Act. To date, we have conducted limited operations and generated only minimal revenue since inception. In light of the foregoing, and on evaluating our internal controls, our board of directors determined that our internal controls are adequate to insure that financial information is recorded, processed, summarized, and reported in a timely and accurate manner in accordance with applicable rules and regulations of the Securities and Exchange Commission. Accordingly, our board of directors concluded that the benefits of retaining an individual who qualifies as an audit committee financial expert would be outweighed by the costs of retaining such a person.

SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under section 16 of the Exchange Act, our directors and executive officers and beneficial owners of more than 10% of the our common stock are required to file certain reports, within specified time periods, indicating their holdings of and transactions in our common stock and derivative securities. Based solely on a review of those reports provided to us and written representations from those persons regarding the necessity to file any such reports, we are not aware of any failures to file reports or report transactions in a timely manner during our fiscal year ended December 31, 2005.

ITEM 10.
EXECUTIVE COMPENSATION.

EXECUTIVE
COMPENSATION

The
following table sets forth the compensation awarded to, earned by or paid to Mr. Tilton
from inception of our company  (March, 1999) through December 31, 2005. We had no other
officers during this period.

|                                                                                |  | Long-Term Compensation Awards |     
|------------------------------------------------------------------------------- |  | ----------------------------- | ----
|
|                                                                                |  |                              
|James D. Tilton, Jr. Chairman of the Board,Chief Executive Officerand President |  |                               | 2003
|                                                                                |  |                              
|James D. Tilton, Jr. Chairman of the Board,Chief Executive Officerand President |  |                               | 2004
|                                                                                |  |                              
|James D. Tilton, Jr. Chairman of the Board,Chief Executive Officerand President |  |                               | 2005

(1)     
In 2003 and 2004, we did not pay Mr. Tilton a regular salary. Under his employment agreement with us, in 2002 we were required to pay him an annual salary of $180,000, respectively. We agreed to pay him an annual salary of $180,000 in 2003 and 2004 but did not do so.  In 2005, we agreed to pay him a salary of $180,000, as well as 2006.

(2)     
Under our Millennium Stock Option Plan, on January 3, 2000, we granted Mr. Tilton options to purchase 3,000,000 shares of our common stock at an exercise price of $0.11. These options were cancelled upon our electing to be regulated as a business development company.

(3)     Due to the fact that in 2002, 2003, and 2004 we did not pay Mr. Tilton a regular salary, in 2002, 2003, and 2004 we made lump-sum compensation payments to Mr. Tilton of $45,000, $125,000, and $45,000, respectively.  Mr. Tilton waived any rights to the $135,000 shortfall in his 2004 annual compensation, the board of directors having previously agreed to pay him $180,000 in 2004.

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(4)     As further compensation in lieu of salary for services performed by him during 2003, in December 2003 we issued to Mr. Tilton 100,000 shares of our Class B preferred stock. These shares were given an imputed value of $50,000 based on the closing bid price of the common stock on the date of issuance. In January 2004 these shares were exchanged for 10,900,000 shares of Class C convertible preferred stock.

(5)     
In January 2004, the 100,000 shares of our Class B preferred stock that we issued to Mr. Tilton in December 2003 were exchanged for 10,900,000 shares of Class C convertible preferred stock. These shares were given an imputed value of $168,000. And we paid Mr. Tilton $169,478 of his $200,000 of accrued compensation.

EMPLOYMENT AGREEMENT

Our employment agreement with James D. Tilton, Jr., ended on December 31, 2002. This agreement provided for payment of an annual base salary of $90,000 for calendar year 2000, $120,000 for calendar year 2001, and $180,000 for calendar year 2002. During those years, we did not pay him a salary. We agreed to pay Mr. Tilton a salary of $180,000 during 2003, but did not actually pay him a salary.

The shortfall between the salary we undertook to pay Mr. Tilton between January 1, 2000 and December 31, 2003, and the compensation payments actual made to him equaled $350,000. In recognition of that fact, in December 2003 we agreed to pay to Mr. Tilton, as and when the board of directors determines that funds are available to do so and in one or more payments of $200,000. In 2004, we paid Mr. Tilton $169,478 of this $200,000.

Mr.  Tiltons employment agreement also provided for the one-time grant under our Millennium Stock Option Plan of 3,000,000 incentive stock options (reduced to 300,000 by the ten-for-one reverse stock split effected in January 2004) to Mr. Tilton at 110% of the fair market value of our common stock on the date of the grant. These options vested but were cancelled upon our electing to be regulated as a business development company.

As of yet we have not entered into a new employment agreement with Mr. Tilton.

We do not pay our directors any compensation for serving as such. We did, however, issue to each of Peter Klamka and Hiram Woo 250,000 shares of our Class C preferred stock upon their joining our board of directors.

ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table shows, as of April 21, 2006, the beneficial ownership of our common stock and preferred stock (1) by any person or group that we know beneficially owns more than 5% of the outstanding common stock or any class of preferred stock, (2) by each director and executive officer, and (3) by all directors and executive officers as a group. Unless otherwise indicated, the holders of the shares shown in this table have sole voting and investment power with respect to those shares. The address of all individuals for whom an address is not otherwise indicated is One RiverPoint Plaza, Suite 706, Jeffersonville, Indiana 47131.

|Name and Address ofBeneficial Owner | Number of Shares ofBeneficially Owned | Class of Stock | Percentage of Class (1)
|----------------------------------- | ------------------------------------- | -------------- | -----------------------
|James D. Tilton, Jr.                |                                       | 218,798        |                        
|                                    |                                       | 218,000        |                        
|                                    |                                      
|Peter Klamka, Director              |                                       | 5,000(2)       |                        
|                                    |                                       | 5,000          |                        
|                                    |                                      
|Hiram Woo, Director                 |                                       | 5,000(2)       |                        
|                                    |                                       | 5,000          |                        
|                                    |                                      
|All directors and                   |                                       | 228,798        |                        
|officers as a group                 |                                       | 228,000        |                        

(1)    
Figures based on 142,024,521 shares of common stock and 228,000 shares of Class C preferred stock being outstanding as of April 21, 2006, with each share of Class C preferred stock being convertible at any time, at the option of the holder, into one share of common stock.

(2)    
Consists of 5,000 shares of Class C preferred stock, each convertible at any time at the option of the holder into one share of common stock.

(3)    
Consists of 218,000 shares of Class C preferred stock, each convertible at any time at the option of the holder into one share of common stock.

10

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EQUITY COMPENSATION PLAN INFORMATION

We currently have no equity compensation plan. Upon our electing in January 2004 to be regulated as a business development company, we discontinued our Millennium Stock Option Plan, which had been our sole compensation plan.

ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The premises housing our executive and administrative office are owned by James D. Tilton, Jr., our chief executive officer. See Description of Property. Starting July 1, 2003, he has charged the company $1,250 per month for our use of these premises, and during 2005 was increased to $1,500 per month.

By way of compensation in lieu of unpaid salary, in 2003 we issued shares to Mr. Tilton and in 2002, 2003, and 2004 we made lump-sum payments to him. See Executive Compensation. In addition, in December 2003 we agreed to pay to Mr. Tilton, as and when the board of directors determines that funds are available to do so and in one or more payments, a bonus of $200,000 in lieu of unpaid salary. In 2004, we paid Mr. Tilton $169,478 of this $200,000. See Employment Agreement.

ITEM 13.  
EXHIBITS.

|No. |  | Description                                                                                                                                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 |  | Articles of incorporation of the registrant (incorporated by reference to the registrants registration statement on Form 10-SB, as amended, filed with the Commission on July 5, 2000).

|3.2 |  | Certificate of designations of Series A preferred stock of the registrant filed with the Nevada Secretary of State on April 18, 2002 (incorporated by reference to the registrants quarterly report on form 10-QSB filed with the Commission on June 6, 2004).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Certificate of designations of Series B preferred stock of the registrant filed with the Nevada Secretary of State on December 17, 2003 (incorporated by reference to the registrants quarterly report on form 10?QSB filed with the Commission on June 6, 2004).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.4 |  | Certificate of amendment of the registrant filed with the Nevada Secretary of State on December 31, 2003 (incorporated by reference to the registrants quarterly report on form 10-QSB filed with the Commission on June 6, 2004).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.5 |  | Certificate of designations of Series C preferred stock of the registrant filed with the Nevada Secretary of State on January 13, 2004 (incorporated by reference to the registrants quarterly report on form 10-QSB filed with the Commission on June 6, 2004).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.6 |  | Corrected certificate of designation of Series D preferred stock of the registrant (filed herewith).
|--- |  | ----------------------------------------------------------------------------------------------------

|3.7 |  | Bylaws of the registrant (incorporated by reference to the registrants registration statement on Form 10-SB, as amended, filed with the Commission on July 5, 2000).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 |  | Debenture issued by the registrant to Patrick L. Brown due April 30, 2004 (incorporated by reference to the registrants quarterly report on form 10-QSB filed with the Commission on June 6, 2004).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | Debenture issued by the registrant to Pinnacle Investment Partners, L.P. due February 7, 2005 (incorporated by reference to the registrants quarterly report on form 10-QSB filed with the Commission on June 6, 2004).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 |  | Securities purchase agreement dated February 7, 2004, between the registrant and Pinnacle Investment Partners, L.P. (incorporated by reference to the registrants quarterly report on form 10-QSB filed with the Commission on June 6, 2004).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | Form of securities purchase agreement providing for purchase of shares of Series D preferred stock and shares of common stock (incorporated by reference to current report on Form 8-K of the registrant filed with the Commission on January 4, 2005).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14.1 |  | Code of Ethics (filed herewith).
|---- |  | --------------------------------

|21.1 |  | Subsidiaries of Registrant (filed herewith).
|---- |  | --------------------------------------------

|31.1 |  | Certification of the Chief Executive Officer under 18 U.S.C. section 1350, as adopted in accordance with section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32.2 |  | Certification of the Chief Executive Officer under 18 U.S.C. section 1350, as adopted in accordance with section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Aggregate fees billed to us for the fiscal years ended December 31, 2005 and 2004 by our principal accountants, Baum & Company, P.A. (through October 25, 2004) and Pohl, McNabola, Berg & Company (thereafter), are as follows:

|                   | For the Years EndedDecember 31,
|------------------ | -------------------------------
|
|                   |                                
|Audit Fees         |                                
|Audit-Related Fees |                                
|Tax Fees           |                                
|Other Fees         |                                

The audit-related fees relate to review services performed by our accountant; the tax fees relate to preparation of our tax returns by our accountant.

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our independent accountants must now be approved in advance by the audit committee to assure that those services do not impair the accountants independence. We do not have an audit committee, so our board of directors reviews and approves audit and permissible non-audit services performed by Baum & Company, P.A., as well as the fees they charge for performing those services.

12

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SIGNATURES

In
accordance with the requirements of Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be  signed on its behalf by the undersigned,
thereunto duly authorized.

|      |                                                                                                                                                               | PHOENIX INTERESTS, INC.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------
|      | Registrant                                                                                                                                                   
|     
|Date: | April 21, 2006                                                                                                                                                |                        
|      | James D. Tilton, Jr.
Chairman, President, Secretary and
Chief Executive Officer
(Principal Executive Officer and
Principal Financial and
 Accounting Officer)

In accordance with the requirements of the Exchange Act, this report is signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

|Signature                                                                                                  | Title                                        | Date          
|---------------------------------------------------------------------------------------------------------- | -------------------------------------------- | --------------
|                                                                                                          
|/s/  James D. Tilton, Jr.James D. Tilton, Jr.(Principal Executive Officer andPrincipal Accounting Officer) | ChairmanPresident andChief Executive Officer | April 21, 2006
|
|                                                                                                          
|/s/  Peter KlamkaPeter Klamka                                                                              | Director                                     | April 21, 2006
|
|                                                                                                          

13

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|PHOENIX
INTERESTS, INC.(formerly Thoroughbred Interests, Inc.)CONSOLIDATED FINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2005 AND 2004
|-------------------------------------------------------------------------------------------------------------------------------------

|CONTENTS                                                                                                     | PAGE
|------------------------------------------------------------------------------------------------------------ | ----
|                                                                                                             |     
|                                                                                                            
|Report of Independent Registered Public Accounting Firm                                                      | F-2 
|                                                                                                            
|                                                                                                            
|Consolidated Financial Statements:                                                                           |     
|                                                                                                            
|Consolidated Balance Sheets as of December 31, 2005 and 2004                                                 | F-3 
|                                                                                                            
|Consolidated Statements of Operations for the years ended               December 31, 2005 and 2004           | F-4 
|                                                                                                            
|Consolidated Statement of Stockholders Deficit for the years ended               December 31, 2005 and 2004 | F-5 
|                                                                                                            
|Consolidated Statements of Cash Flows for the years ended               December 31, 2005 and 2004           | F-6 
|                                                                                                            
|Notes to Consolidated Financial Statements                                                                   | F-7 

F-1

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# Report of Independent Registered Public Accounting Firm

# 

To the
Board of Directors and Stockholders ofPhoenix Interests, Inc. Jeffersonville, Indiana

We have audited the accompanying consolidated balance sheet of Phoenix Interests, Inc. (formerly Thoroughbred Interests, Inc.) and subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders deficit and cash flows for the years then ended. 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 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 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 financial position of Phoenix Interests, Inc. and subsidiary as of December 31, 2005 and 2004, and the consolidated results of their operations and cash flows for the years then ended, 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 discussed in Note 1, the Company has incurred a net loss of $592,328, used cash for operations of $762,081 for the year ended December 31, 2005, has an accumulated deficit of $5,637,599 as of December 31, 2005 and has a working capital deficit of $3,856,533 as of December 31, 2005. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 8 to the consolidated financial statements, the Company has restated its consolidated financial statements for the year ended December 31, 2004 to properly reflect the accounting for convertible debentures, convertible preferred stock and related derivatives.

/s/  Pohl, McNabola, Berg & Company,
LLPCertified Public Accountants

San Francisco, CaliforniaApril 7, 2006

F-2

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)CONSOLIDATED BALANCE SHEETSDECEMBER 31, 2005 AND 2004
|----------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                  | 
|------------------------------------------------------------------------------------------------------------------------------------------------- | 
|
|
|Assets:                                                                                                                                           | 
|Current assets                                                                                                                                    | 
|Cash and cash equivalents                                                                                                                         | 
|Accounts receivable                                                                                                                               | 
|                                                                                                                                                  | 
|Total current assets                                                                                                                              | 
|Other assets                                                                                                                                      | 
|Property and equipment, net of accumulated depreciation of $6,864 and $910                                                                        | 
|Website development costs, net of accumulated amortization of $19,790 and $0                                                                      | 
|                                                                                                                                                  | 
|Total Assets                                                                                                                                      | 
|                                                                                                                                                  | 
|                                                                                                                                                  | 
|Liabilities & Stockholders Deficit:                                                                                                              | 
|Current Liabilities                                                                                                                               | 
|Convertible notes payable                                                                                                                         | 
|Accounts payable and accrued expenses                                                                                                             | 
|Accrued compensation - related party                                                                                                              | 
|Capital lease obligation                                                                                                                          | 
|Dividends payable                                                                                                                                 | 
|Accrued derivative liability                                                                                                                      | 
|Preferred stock; Series A; $0.001 par value; 5,000 shares authorized;                2,656 and 3,340 shares issued and outstanding                | 
|Preferred stock; Series D convertible; $0.001 par value; 25,000 shares authorized;                11,890 and 12,119 shares issued and outstanding | 
|Preferred stock; Series E convertible; $0.001 par value; 5,000 shares authorized;                4,018 and 0 shares issued and outstanding        | 
|                                                                                                                                                  | 
|Total current liabilities                                                                                                                         | 
|                                                                                                                                                  | 
|                                                                                                                                                  | 
|Capital lease obligation, net of current portion                                                                                                  | 
|                                                                                                                                                  | 
|Total liabilities                                                                                                                                 | 
|                                                                                                                                                  | 
|Commitments and contingencies                                                                                                                     | 
|                                                                                                                                                  | 
|Stockholders Deficit                                                                                                                             | 
|Preferred stock, Series B; par value $0.001; 100,000 shares authorized;                                                                           | 
|0 and 0 shares issued and outstanding                                                                                                             | 
|Preferred stock, Series C; par value $0.001; 12,000,000 shares authorized,                                                                        | 
|228,000 shares issued and outstanding                                                                                                             | 
|Common stock, par value $0.001; 5,000,000,000 shares authorized;                                                                                  | 
|30,176,943 and 1,044,113 shares issued and outstanding                                                                                            | 
|in 2005 and 2004, respectively                                                                                                                    | 
|Additional paid-in capital                                                                                                                        | 
|Accumulated deficit                                                                                                                               | 
|                                                                                                                                                  | 
|Total stockholders deficit                                                                                                                       | 
|                                                                                                                                                  | 
|Total Liabilities & Stockholders Deficit                                                                                                         | 
|                                                                                                                                                  | 

The
accompanying notes are an integral part of these consolidated financial statements.

F-3

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                               | 2005 |  | 2004 |          
|------------------------------------------------------------------------------ | ---- |  | ---- | ---------
|
|                                                                               |      |  |      |          
|Revenues                                                                       |      |  | $    | 26,234   
|                                                                               |      | 
|Operating expenses:                                                            |      |  |      |          
|Compensation                                                                   |      |  |      | 180,000  
|Professional fees                                                              |      |  |      | 415,561  
|Office expenses                                                                |      |  |      | 47,384   
|Travel                                                                         |      |  |      | 22,490   
|Advertising                                                                    |      |  |      | 26,243   
|Depreciation and amortization                                                  |      |  |      | 28,209   
|Equipment rental                                                               |      |  |      | 2,343    
|Rent                                                                           |      |  |      | 18,000   
|Insurance                                                                      |      |  |      | 3,902    
|Utilities                                                                      |      |  |      | 605      
|Bank charges                                                                   |      |  |      | 664      
|Impairment expense                                                             |      |  |      | 16,020   
|                                                                               |      |  |      |          
|Total operating expenses                                                       |      |  |      | 761,421  
|                                                                               |      |  |      |          
|Loss from operations                                                           |      |  |      | (735,187 
|                                                                               |      | 
|Other income (expense)                                                         |      | 
|Interest expense                                                               |      |  |      | (15,195  
|Financing costs                                                                |      |  |      | (27,500  
|Change in accrued derivative liability                                         |      |  |      | 185,554  
|                                                                               |      |  |      |          
|Total other income (expense)                                                   |      |  |      | 142,859  
|                                                                               |      | 
|Loss before provision for income taxes                                         |      |  |      | (592,328 
|                                                                               |      | 
|Provision for income taxes                                                     |      |  |      | -        
|                                                                               |      |  |      |          
|Net loss from continuing operations                                            |      |  |      | (592,328 
|Gain from discontinued operations, net of tax                                  |      |  |      | -        
|                                                                               |      |  |      |          
|Net loss                                                                       |      |  |      | (592,328 
|Preferred stock dividends                                                      |      |  |      | (279,455 
|                                                                               |      |  |      |          
|Net loss attributed to common stockholders                                     |      |  | $    | (871,783 
|                                                                               |      |  |      |          
|Net loss per share attributed to common      stockholders - basic and diluted: |      |  |      |          
|Continuing operations                                                          |      |  | $    | (0.09    
|Discontinued operations                                                        |      |  |      | -        
|                                                                               |      |  |      |          
|                                                                               |      |  | $    | (0.09    
|                                                                               |      |  |      |          
|Weighted average shares outstanding basic and diluted                          |      |  |      | 9,433,670
|                                                                               |      |  |      |          

The
accompanying notes are an integral part of these consolidated financial statements.

F-4

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|PHOENIX INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS DEFICITFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                            | Preferred Stock |  |   |        |   |  |          |             |   |        | 
|--------------------------------------------------------------------------------------------------------------------------- | --------------- |  | - | ------ | - |  | -------- | ----------- | - | ------ | 
|
|                                                                                                                            |                
|                                                                                                                            |                 |  |   |        |   |  | Paid-in  | Accumulated
|                                                                                                                            |                 |  |   | Amount |   |  | Shares   |             |   | Amount | 
|                                                                                                                            |                 |  |   |        |   |  |          |             |   |        | 
|Balance, December 31, 2003, as restated                                                                                     |                 |  | $ | 100    |   |  | 100,000  |             | $ | -      | 
|Common stock issued for consulting services                                                                                 |                 |  |   |        |   |  |          |             |   |        | 
|Common stock issued for conversion of debt                                                                                  |                 |  |   |        |   |  |          |             |   |        | 
|Common stock issued for conversion of   accrued interest                                                                    |                 |  |   |        |   |  |          |             |   |        | 
|Common stock issued to redeem Series A   preferred stock                                                                    |                 |  |   |        |   |  |          |             |   |        | 
|Exchange of Series B preferred stock for   Series C preferred stock and issuance of   Series C preferred stock for services |                 |  |   | (100   | ) |  | (100,000 | )           |   | 228    | 
|Value of beneficial conversion feature in   connection with issuance of convertible debt                                    |                 |  |   |        |   |  |          |             |   |        | 
|Value of beneficial conversion feature in   connection with issuance of Series D   preferred stock                          |                 |  |   |        |   |  |          |             |   |        | 
|Common stock issued with Series D   preferred stock                                                                         |                 |  |   |        |   |  |          |             |   |        | 
|Payment of commissions and offering expenses                                                                                |                 |  |   |        |   |  |          |             |   |        | 
|Accrued preferred stock dividends                                                                                           |                 |  |   |        |   |  |          |             |   |        | 
|Net loss                                                                                                                    |                 |  |   |        |   |  |          |             |   |        | 
|                                                                                                                            |                 |  |   |        |   |  |          |             |   |        | 
|Balance, December 31, 2004, as restated                                                                                     |                 |  |   | -      |   |  | -        |             |   | 228    | 
|Common stock issued for settlement    with investors                                                                        |                 |  |   |        |   |  |          |             |   |        | 
|Common stock issued for conversion of debt                                                                                  |                 |  |   |        |   |  |          |             |   |        | 
|Common stock issued to redeem Series A   preferred stock                                                                    |                 |  |   |        |   |  |          |             |   |        | 
|Value of beneficial conversion feature in   connection with issuance of Series   D & E preferred stock                      |                 |  |   |        |   |  |          |             |   |        | 
|Common stock issued with Series E   preferred stock                                                                         |                 |  |   |        |   |  |          |             |   |        | 
|Proceeds from the sale of common stock                                                                                      |                 |  |   |        |   |  |          |             |   |        | 
|Payment of commissions and offering expenses                                                                                |                 |  |   |        |   |  |          |             |   |        | 
|Conversion of Series D preferred stock   to common stock                                                                    |                 |  |   |        |   |  |          |             |   |        | 
|Conversion of Series E preferred stock   to common stock                                                                    |                 |  |   |        |   |  |          |             |   |        | 
|Accrued preferred stock dividends                                                                                           |                 |  |   |        |   |  |          |             |   |        | 
|Net loss                                                                                                                    |                 |  |   |        |   |  |          |             |   |        | 
|                                                                                                                            |                 |  |   |        |   |  |          |             |   |        | 
|Balance, December 31, 2005                                                                                                  |                 |  | $ | -      |   |  | -        |             | $ | 228    | 
|                                                                                                                            |                 |  |   |        |   |  |          |             |   |        | 

The
accompanying notes are an integral part of these consolidated financial statements.

F-5

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                 | For the years endedDecember 31,
|---------------------------------------------------------------- | -------------------------------
|
|                                                                 |                                
|Cash flows from operating activities:                            |                                
|Net loss                                                         |                                
|Adjustments to reconcile net loss to net cash                    |                                
|used in operating activities:                                    |                                
|Depreciation and amortization                                    |                                
|Common stock issued for consulting services                      |                                
|Preferred stock issued to officer and directors for compensation |                                
|Common stock issued for settlement with investors                |                                
|Debentures issued for services                                   |                                
|Amortization of beneficial conversion feature                    |                                
|Change in accrued derivative liability                           |                                
|Impairment expense                                               |                                
|Changes in operating assets and liabilities:                    
|Accounts receivable                                              |                                
|Accounts payable and accrued expenses                            |                                
|Accrued compensation - related party                             |                                
|                                                                 |                                
|Net cash used in operating activities                            |                                
|                                                                 |                                
|                                                                 |                                
|Cash flows from investing activities:                            |                                
|Payment of website development costs                             |                                
|Payment for property and equipment                               |                                
|                                                                 |                                
|Net cash used in investing activities                            |                                
|                                                                 |                                
|                                                                 |                                
|Cash flows from financing activities:                            |                                
|Proceeds from sale of convertible debentures                     |                                
|Proceeds from sale of Class D preferred stock                    |                                
|Proceeds from sale of Class E preferred stock                    |                                
|Proceeds from sale of common stock                               |                                
|Offering costs                                                   |                                
|Payment of preferred stock dividends                             |                                
|Stockholder loan, net                                            |                                
|Payment of capital lease obligation                              |                                
|                                                                 |                                
|Net cash provided by financing activities                        |                                
|                                                                 |                                
|Net (decrease) increase in cash and cash equivalents             |                                
|Cash and cash equivalents beginning of year                      |                                
|                                                                 |                                
|Cash and cash equivalents end of year                            |                                
|                                                                 |                                
|                                                                 |                                
|Supplemental Disclosure of Cash Flow Information:                |                                
|Interest paid                                                    |                                
|Income taxes paid                                                |                                
|                                                                 |                                
|Supplemental Non-Cash Investing and Financing Activities:        |                                
|Capital lease obligation                                         |                                
|Conversion of debentures/notes payable to common stock           |                                
|Issuance of debentures as payment for accrued dividends          |                                
|Conversion of debenture to Series D preferred stock              |                                
|Conversion of Series A, D & E preferred stock to common stock    |                                

The
accompanying notes are an integral part of these financial statements.

F-6

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE
1  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Phoenix Interests, Inc. (the Company) was organized under the laws of Nevada on March 25, 1999 as Thoroughbred Interests, Inc.  Effective May 18, 2004, the Company changed its name to Phoenix Interests, Inc. The Companys prior business operations consisted of purchasing, training and selling of thoroughbred horses.  As of December 31, 2003, the Company liquidated its entire inventory of thoroughbred horses. On January 20, 2004, the Company elected to be regulated as a business development company under the Investment Company Act of 1940. The Company filed Form 1-E under the Securities and Exchange Act notifying the Securities and Exchange Commission of the intent to sell, under Regulation E promulgated under the Securities Act of 1933, up to $5 million of the Companys common stock.  On March 14, 2006, the Company filed a Definitive Information Statement with the Securities and Exchange Commission to withdraw as a business development company under the Investment Company Act of 1940.  The financial statements for the years ended December 31, 2005 and 2004 have not been presented in a business development company format.

Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company incurred a net loss for the year ended December 31, 2005 of $592,328, used cash for operating activities of $762,081 for the year ended December 31, 2005 and at December 31, 2005, had an accumulated deficit of $5,637,599 and a working capital deficit of $3,856,533.  These conditions raise substantial doubt as to the Companys ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that it can continue to raise equity financing to support its operations.

Stock Splits

On January 7, 2004, the Company affected a one-for-ten reverse stock split of its common stock.  On January 20, 2006, the Company authorized a one for fifty reverse stock split of its common stock. All share information for common shares has been retroactively restated for these two reverse stock splits.

Consolidated Financial Statements

The accompanying consolidated financial statements include the accounts of the Company and its wholly owed subsidiary, Online Enterprises, Inc.  The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.  All inter-company accounts and transactions have been eliminated.

Stock Based Compensation

SFAS No. 123, Accounting for Stock-Based Compensation, establishes and encourages the use of the fair value based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services are rendered. The statement also permits companies to elect to continue using the current intrinsic value accounting method specified in Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, to account for stock-based compensation. The Company has elected to use the intrinsic value based method and has disclosed the pro forma effect of using the fair value based method to account for its stock-based compensation. The Company uses the fair value method for options granted to non-employees. There were no stock options granted for the years ended December 31, 2005 and 2004.

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. As of December 31, 2005, the Company used estimates in determining accrued expenses, the value of stock based compensation issued for services and the value of the accrued derivative liability. Actual results could differ from these estimates.

Fair Value of Financial Instruments

For certain of the Companys financial instruments, including cash, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities. The amounts shown for notes and debentures payable also approximate fair value because current interest rates and terms offered to the Company for similar debt are substantially the same.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid debt instruments purchased with a maturity of three months or less, plus all certificates of deposit.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and accounts receivables. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $100,000 insurance limit. The Company extends credit based on an evaluation of the customers financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customers financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.  The Company derived 100% of its revenue through AmericaTab.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of 2-5 years. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains and losses on disposals are included in the results of operations. Depreciation expense for property and equipment for the years ended December 31, 2005 and 2004 was $8,419 and $910, respectively.  During the year ended December 31, 2005, the Company took an impairment expense of $16,020 related to the write off of certain equipment.

Web Development Costs

Website development costs are for the development of the Companys Online Enterprises, Inc. subsidiarys Internet website. These costs have been capitalized when acquired and installed, and will be amortized over three years once placed in service. The Company accounts for these costs in accordance with EITF 00-2, Accounting for Website Development Costs, which specifies the appropriate accounting for costs incurred in connection with the development and maintenance of websites. Website development costs will be amortized over 36 months. Amortization began in 2005 when the website is placed in service.  Amortization expense for web development costs for the years ended December 31, 2005 and 2004 was $19,790 and $0, respectively.

F-8

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Impairment of Long-Lived Assets

In accordance with Statement No. 144, long-lived assets, such as property, equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Organization Costs

The Company has incurred various expenditures in the formation of its corporate and organizational structure. In accordance with SOP 98-5 these costs were expensed as incurred.

Accrued Derivative Liability

The convertible debenture and the Series A, D and E preferred stock can be converted into common stock at a conversions price that is a percentage of the market price; therefore the number of shares that could be required to be delivered upon net-share settlement is essentially indeterminate.  In accordance with SFAS No. 133, the Company has bifurcated the beneficial conversion features embedded in its convertible debentures and preferred stock and has recorded the fair value of these beneficial conversion features as a current liability.

Convertible Preferred Stock

The Companys Series A, D and E preferred stock are presented as a current liability since the Company has financial instruments that are convertible into common stock at a conversion price that is a percentage of the market price; therefore the number of shares that could be required to be delivered upon net-share settlement is essentially indeterminate and the Company does not have enough authorized shares to satisfy the conversion of its convertible preferred stock.

Revenue Recognition

Revenue is recognized at the time a bet is placed on the Companys online website.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

F-9

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Earnings (Loss) Per Share

The Company reports earnings (loss) per share in accordance with SFAS No. 128, Earnings per Share. Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of options and warrants to purchase common shares would have an anti-dilutive effect. The following potential common shares have been excluded from the computation of diluted net loss per share for the years ended December 31, 2005 and 2004 because the effect would have been anti-dilutive:

|                                                       |           
|------------------------------------------------------ | ----------
|                                                       | 2005      
|Common stock issuable upon conversion of notes payable | 13,629,744

Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Loss, establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. For the year ended December 31, 2005 and 2004, the Company did not have items that represented other comprehensive income and, accordingly, a statement of comprehensive loss has not been included herein.

Reclassification

Certain reclassifications have been made to the 2004 balances to conform to the 2005 presentation.

Recently Issued Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. This statement applies to all voluntary changes in accounting principle and requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. This statement also makes a distinction between retrospective application of an accounting principle and the restatement of financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. SFAS No. 154 is not expected to have a material effect on the consolidated financial position or results of operations of the Company.

In February 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS No. 155 amends SFAS No 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.  SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.  This statement is effective for all financial instruments acquired or issued after the beginning of the Companys first fiscal year that begins after September 15, 2006.  SFAS No. 155 is not expected to have a material effect on the consolidated financial position or results of operations of the Company.

F-10

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In December 2004, the FASB issued SFAS No. 123 (Revised), entitled Share-Based Payment.  This revised Statement eliminates the alternative to use APB Opinion No. 25s intrinsic value method of accounting that was provided in SFAS No. 123 as originally issued.  Under Opinion 25, issuing stock options to employees generally resulted in recognition of no compensation cost.  This Statement requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards.  For public companies that file as a small business issuer, this Statement is effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005.  The adoption of SFAS 123 (Revised) will not impact the consolidated financial statements as the Company has not granted any equity instruments to employees.

In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements (EITF 05-6.) EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005.  EITF 05-6 is not expected to have a material effect on its consolidated financial position or results of operations.

NOTE
2  RELATED PARTY TRANSACTIONS

The Company commenced in April 2000 utilizing an office Mr. Tilton leased under an informal agreement at $2,638 per month. The Company relocated its offices in July 2003 and currently leases for $1,500 per month, a residence owned by Mr. Tilton. In review of this transaction, disclosure pursuant to FASB 13 is not required since the Company has no legal commitment for future payment of rent. The Company in the normal course of its business operates in conjunction with its CEO in various business dealings. In order to achieve certain economic savings, the Company in certain horse-related transactions such as boarding, training, insurance coverage operated under the name of its CEO. Total rent expense paid to Mr. Tilton for the years ended December 31, 2005 and 2004 was $18,000 and $15,000, respectively.

In 2003, the Company paid its CEO a $125,000 advance. In December 2003, the Company issued to its CEO, as compensation 100,000 shares of its Series B preferred stock valued at $50,000. In January 2004, these shares were exchanged for 218,000 shares of Series C convertible preferred stock valued at $168,000. At December 31, 2005, the Company reflected an accrual for unpaid officer compensation of $9,371.

NOTE
3  CONVERTIBLE NOTES PAYABLE

The Company has the following convertible debentures outstanding as of December 31, 2005 and 2004:

|                                                                                                                                                                                                                                                                                                                           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|
|                                                                                                                                                                                                                                                                                                                           | 
|Augustine Fund, LP, bears interest at 8% per annum, convertible to common stock at a price equal to 70% of the closing bid price. The debenture matured on December 31, 2004 and on March 10, 2005Augustine exchanged their debenture and accrued interest totaling $272,340 for 2,724 shares of Series D preferred stock. | 
|Compass Capital Group, bears interest at 8% per annum, convertible to common stock at a price equal to 65% of the closing bid price. Thedebenture matured on January 1, 2005 and in September 2005 the Company settled with Compass allowing it to convert $11,750 per month.                                              | 
|                                                                                                                                                                                                                                                                                                                           | 
|Totals                                                                                                                                                                                                                                                                                                                     | 
|                                                                                                                                                                                                                                                                                                                           | 

F-11

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the year ended December 31, 2004, the Company issued three convertible notes payable for an aggregate of $665,000  that allows the holder to convert the debt into shares of the Companys common stock at discounts ranging from 35% to 50%. The beneficial conversion feature associated with this debt amounted to $369,615 which was amortized over the life of the respective notes payable. As of December 31, 2004, the entire discount of $369,615 has been amortized to financings costs in the accompanying statements of operations.

NOTE
4 STOCKHOLDERS DEFICIT

On January 2, 2004, the Company filed a Certificate of Amendment to its Articles of Incorporation for the State of Nevada to amend its capitalization. The amendment grants the Company the authority to issue 1 billion shares of par value $0.001 stock consisting of 20,000,000 preferred shares and 980,000,000 common shares.

On October 5, 2005, the Company filed an Information Statement requesting approval from the stockholders to give the Companys board of directors the authority to (1) effect a reverse stock split of each share of common stock of the Company at a ratio of one share for up to 50 shares of common stock outstanding, as determined by the Companys board of directors at its discretion, and (2) amend the Companys Articles of Incorporation to increase from 980,000,000 to 5,000,000,000 the number of shares of common stock the Company is authorized to issue. The stockholders approved items (1) and (2) above and on November 9, 2005, the Company filed a Certificate of Amendment with the Nevada Secretary of State increasing the number of authorized common shares to 5,000,000,000.

On January 7, 2004, the Company affected a one-for-ten reverse stock split of its common stock.  On January 20, 2006, the Company authorized a one for fifty reverse stock split of its common stock. All share information for common shares has been retroactively restated for these two reverse stock splits.

Common Stock

The Company had the following transactions in its common stock:

     
in February and March 2004, the Company issued 124,089 shares of common stock to holders of notes payable for the conversion of $183,120 in notes payable.

     
in February 2004, the Company issued 1,800 shares of common stock in exchange for shares for Series A preferred stock.

     
in March 2004, the Company issued 5,000 shares of common stock to a consultant for services valued at $5,000.

     
in April and June 2004, the Company issued 104,290 shares of common stock to holders of notes payable for the conversion of $67,340 in notes payable.

     
in April 2004, the Company issued 20,000 shares of common stock in exchange for shares for Series A preferred stock.

     
in September 2004, the Company issued 105,000 shares of common stock to holders of notes payable for the conversion of $58,600 in notes payable.

     
in August 2004, the Company issued 68,000 shares of common stock in exchange for shares for Series A preferred stock.

     
in October and December 2004, the Company issued 174,476 shares of common stock to holders of notes payable for the conversion of $75,400 in notes payable.

     
in December 2004, the Company issued 7,238 shares of common stock as payment for $3,800 of accrued interest.

F-12

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     
in November and December  2004, the Company issued 130,000 shares of common stock in exchange for shares for Series A preferred stock.

     
in December 2004, the Company sold 150,000 shares of common stock for $41,250 in cash.

     
in February of 2005, the Company issued 46,000 shares of common stock in exchange for the conversion of 184 shares of Series A preferred stock;

     
in February of 2005, the Company issued 357,195 shares of common stock in exchange for the conversion of 1,000 shares of Series D preferred stock;

     
in April of 2005, the Company issued 17,245 shares of common stock in exchange for the conversion of 40 shares of Series D preferred stock;

     
in April of 2005, the Company issued 344,828 shares of common stock in exchange for the conversion of 500 shares of Series A preferred stock;

     
in April of 2005, the Company issued 53,855 shares of common stock in exchange for the conversion of 80 shares of Series D preferred stock;

     
in May of 2005, the Company issued 580,000 shares of common stock in exchange for the conversion of 928 shares of Series D preferred stock;

     
in May of 2005, the Company issued 300,000 shares of common stock in connection with an offering of its Series E preferred stock;

     
in June of 2005, the Company issued 63,180 shares of common stock in exchange for the conversion of 79 shares of Series D preferred stock.

     
in July 2005, the Company issued 710,000 shares of common stock in exchange for the conversion of 61 shares of Series D preferred stock and 178 shares of Series E preferred stock;

     
in July 2005, the Company issued 500,000 shares of common stock in connection with a settlement with investors valued at $27,500;

     
in August 2005, the Company issued 2,000,000 shares of common stock for $10,000 in cash;

     
in August 2005, the Company issued 1,033,754 shares of common stock in exchange for the conversion of 105 shares of Series D preferred stock and 92 shares of Series E preferred stock;

     
in August 2005, the Company issued 653,400 shares of common stock in exchange for the conversion of a convertible debenture of $6,370;

     
in September 2005, the Company issued 6,704,749 shares of common stock in exchange for the conversion of 630 shares of Series D preferred stock and 112 shares of Series E preferred stock;

     
in September 2005, the Company issued 4,284,760 shares of common stock for $45,000 in cash;

     
in October 2005, the Company issued 900,000 shares of common stock in exchange for the conversion of a convertible debenture of $8,775;

     
in October 2005, the Company sold 8,000,000 shares of common stock for $70,000 in cash;

     
in November 2005, the Company issued 99,048 shares of common stock in exchange for the conversion of 10 shares of Series D preferred stock;

     
in November 2005, the Company issued 1,132,692 shares of common stock in exchange for the conversion of a convertible debenture of $14,725;

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     
in December 2005, the Company issued 146,996 shares of common stock in exchange for the conversion of 20 shares of Series D preferred stock; and

     
in December 2005, the Company issued 1,205,128 shares of common stock in exchange for the conversion of a convertible debenture of $11,750;

Preferred Stock

The Company has debt and equity instruments that can be converted into common stock at a conversion prices that are a percentage of the market price; therefore the number of shares that could be required to be delivered upon net-share settlement is essentially indeterminate.  Therefore, the Series A, D and E Preferred Stock which can be converted into shares of common stock are shown in the accompanying consolidated balance sheet as a current liability.

Series A Preferred Stock -  There are 5,000 shares of Series A preferred stock authorized. Each share of Series A preferred stock is entitled to receive a monthly dividend of $2.00 per share, payable quarterly in arrears, and is convertible into common stock at the rate of $100 per share ($500,000 in the aggregate) at a discount of (1) 75% of the closing bid price of the common stock (if at the option of the holder), or (2) 60% of the closing bid price of the common stock (if at the option of our company). In the event of liquidation, all shares of Series A preferred stock would automatically be converted into shares of our common stock at rate of $100 per share, with holders of shares of Series A preferred stock being entitled to receive, in the aggregate, shares of our common stock valued at $500,000. Shares of Series A preferred stock vote with shares of our common stock on an as-converted basis.

Series B Preferred Stock - There are 100,000 shares of Series B preferred stock authorized. In the event of liquidation, each shares of Series B preferred stock ranks equivalent to one share of our common stock. Shares of Series B preferred stock are not entitled to participate in dividends declared on our common stock. The Series B preferred stock votes together with our common stock on the basis of 1,000 votes per share.

Series C Preferred Stock - There are 12,000,000 shares of Series C preferred stock authorized. Each share of Series C preferred stock is convertible into one share of our common stock. The Series C preferred stock is non-interest bearing, does not have voting rights, and is not entitled to receive dividends. In the event of a liquidation, each share of Series C preferred stock will automatically convert into one share of our common stock and will otherwise not be entitled to any preference over shares of our common stock or any shares of our preferred stock. Shares of Series C preferred stock are entitled to name two members of our board of directors.

Series D Preferred Stock - There are 25,000 shares of Series D preferred stock authorized.  Shares of Series D preferred stock are entitled to participate, on an as-converted basis, in any dividends declared on the common stock.   In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Series D preferred stock shall be entitled to share pari passu with the holders of shares of common stock in the assets of the Corporation, on an as converted basis, whether such assets are capital or surplus of any nature. Any outstanding shares of Series D preferred stock may, at the option of the holder, be converted at any time or from time to time into fully paid and nonassessable shares of common stock at the conversion rate in effect at the time of conversion, determined as provided herein, except that (1) a holder of shares of Series D preferred stock may at any given time convert only up to that number of shares of Series D preferred stock as would result in the aggregate beneficial ownership of the Companys common stock (calculated in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of that holder and all persons affiliated with that holder not being more than 4.99% of the Companys common stock then outstanding and (2) a holder of shares of Series D preferred stock may not convert more than half of that holders shares of Series D preferred stock within any 30-day period.  The number of shares into which one share of Series D preferred stock is convertible will be determined by dividing (1) the sum of (A) Stated Value plus (B) an amount equal to 1% of the Stated Value multiplied by the number of months from the original issue date until the date of conversion (pro rated for any period of less than a month) by (2) the conversion price at that time. The conversion price is the lesser of (1) 70% of the closing bid price and (2) $0.0192 (the amount being 120% of the closing bid price on December 22, 2004).

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INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Series E Preferred Stock - There are 5,000 shares of Series E preferred stock authorized.  Shares of Series E preferred stock may, at the option of the holder, be converted into shares of common stock at the conversion rate in effect at the time of conversion. The number of shares into which one share of Series E preferred stock is convertible will be determined by dividing (1) the sum of (A) the Stated Value (equal to $100) plus (B) an amount equal to 1.5% of the Stated Value multiplied by the number of months from the date of issuance until the date of conversion (pro rated for any period of less than a month) by (2) the lesser of (A) $0.006 and (B) the Conversion Price at that time. For these purposes, Conversion Price means 70% of the Closing Bid Price, and Closing Bid Price on a given day means the lowest closing bid price of the common stock out of the closing bid price of the common stock on each of the five immediately preceding trading days on NASDAQ or any other principal securities price quotation system or market on which prices of the common stock are reported.

The Company had the following transactions in its preferred stock:

     
in January 2004, the Companys CEO James Tilton exchanged 100,000 shares of Series B preferred stock into 218,000 shares of Series C preferred stock and recorded an additional expense associated with this exchange of $168,000;

     
in January 2004, the Company issued 5,000 shares of Series C preferred stock to each of its two newly appointed board members and recognized an expense of $10,000;

     
in December 2004, the Company issued 7,500 shares of Series D preferred stock for $708,750 in cash. The 7,500 shares of Series D preferred stock issued in this transaction can be converted into shares of the Companys common stock at 70% of the current market price.  The beneficial conversion feature resulting from this issuance amounted to $362,679 which has been recorded in the accompanying financial statements as a dividend;

     
in December 2004, the Company issued 4,619 shares of Series D preferred stock in exchange for $461,900 of notes payable The 4,619 shares of Series D preferred stock issued in this transaction can be converted into shares of the Companys common stock at 70% of the current market price.  The beneficial conversion feature resulting from this issuance amounted to $197,957 which has been recorded in the accompanying financial statements as a dividend.

     
in March of 2005, the Company issued 2,724 shares of Series D preferred stock in exchange for notes payable  and accrued interest of $250,340 and $22,000, respectively.  The 2,724 shares of Series D preferred stock issued in this transaction can be converted into shares of the Companys common stock at 70% of the current market price.  The beneficial conversion feature resulting from this issuance amounted to $116,743 which has been recorded in the accompanying financial statements as a dividend.

     
in May of 2005, the Company issued 3,000 shares of Series E preferred stock for $300,000 in cash.  In connection with this offering the Company also issued to the Series E investors 5,000 shares of its common stock for each share of Series E preferred stock purchased.  The total proceeds received of $300,000 were allocated to common stock and Series E preferred stock in the amounts of $82,500 and $217,500, respectively.  The 3,000 shares of Series E preferred stock issued in this transaction can be converted into shares of the Companys common stock at 70% of the current market price.  The beneficial conversion feature resulting from this issuance amounted to $211,071 which has been recorded in the accompanying financial statements as a dividend.

     
in September of 2005, the Company issued 100 shares of Series E preferred stock for $10,000 in cash.   The 100 shares of Series E preferred stock issued in this transaction can be converted into shares of the Companys common stock at 70% of the current market price.  The beneficial conversion feature resulting from this issuance amounted to $4,286 which has been recorded in the accompanying financial statements as a dividend.

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|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     
in November and December of 2005, the Company issued 1,300 shares of Series E preferred stock for $130,000 in cash.   The 1,300 shares of Series E preferred stock issued in this transaction can be converted into shares of the Companys common stock at 70% of the current market price.  The beneficial conversion feature resulting from this issuance amounted to $55,714 which has been recorded in the accompanying financial statements as a dividend.

Stock Option Plan

The Board of Directors has approved The Millennium Stock Option Plan effective as of January 3, 2000 to compensate executives, key management personnel and consultants of the Company. The plan document has authorized a maximum of 10,000,000 shares of common stock to be optioned at an exercise price to be determined by the Company. In the case of the incentive stock option the exercise price shall not be less than 100% of the fair market value of the shares on the date the option is granted. The stock options are exercisable no sooner than six months nor more than ten years from the date it is granted. The fair market value of common stock options granted will be reflected as compensation issued.  In January 2004 the Millennium Stock Option Plan was discontinued.

The following table summarizes the options outstanding:

|                           | Shares |  | WeightedAverageExercisePrice
|-------------------------- | ------ |  | ----------------------------
|Balance, December 31, 2003 |        |  |                             
|Canceled                   |        |  |                             
|                           |        |  |                             
|Balance, December 31, 2004 |        |  |                             
|Canceled                   |        |  |                             
|                           |        |  |                             
|Balance, December 31, 2005 |        |  |                             
|                           |        |  |                             

NOTE
5  INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Companys deferred tax liabilities and assets as of December 31, 2005 are as follows:

|                           | 
|-------------------------- | 
|
|                           | 
|Deferred tax assets:       | 
|Federal net operating loss | 
|State net operating loss   | 
|                           | 
|                           | 
|Total deferred tax assets  | 
|Less valuation allowance   | 
|                           | 
|                           | 
|                           | 

At December 31, 2005, the Company had federal and state net operating loss (NOL) carryforwards of approximately $4,060,000 and $4,152,000, respectively. NOLs could, if unused, expire in varying amounts in the years 2017 through 2019.

The valuation allowance increased by $221,000 and $433,000 during 2005and 2004, respectively.  The Company has provided a 100% valuation allowance on the deferred tax assets at December 31, 2005 to reduce such asset to zero, since there is no assurance that the Company will generate future taxable income to utilize such asset. Management will review this valuation allowance requirement periodically and make adjustments as warranted.

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INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The reconciliation of the effective income tax rate to the federal statutory rate for the years ended December 31, 2005 and 2004 is as follows:

|                                  | 
|--------------------------------- | 
|
|                                  | 
|Federal income tax rate           | 
|State tax, net of federal benefit | 
|Increase in valuation allowance   | 
|                                  | 
|Effective income tax rate         | 
|                                  | 

Utilization of the net operating loss and tax credit carryforwards is subject to significant limitations imposed by the change in control under I.R.C. 382, limiting its annual utilization to the value of the Company at the date of change in control times the federal discount rate.

NOTE
6  COMMITMENTS AND CONTINGENCIES

Leases

The Company leases an auto and certain equipment under capital lease obligations. Future minimum lease payments under non-cancelable capital and operating leases with initial or remaining terms of one year or more are as follows:

|                                            | 
|------------------------------------------- | 
|
|                                            | 
|Years ending December 31,                   | 
|2006                                        | 
|2007                                        | 
|2008                                        | 
|                                            | 
|Net minimum lease payments                  | 
|                                            | 
|Less amount representing interest           | 
|                                            | 
|Present value of net minimum lease payments | 
|Less: Current portion                       | 
|                                            | 
|Long-term portion                           | 
|                                            | 

Included in property and equipment is capitalized lease equipment of $24,645 with accumulated amortization of $6,864 at December 31, 2005.

Litigation

The Company may be named as a defendant in legal actions arising from its normal operations, and from time-to-time is presented with claims for damages arising out of its actions. The management of the Company anticipates that any damages or expenses it may incur in connection with these actions, individually and collectively, will not have a material adverse effect on the Company. As of December 31, 2005, the Company was not a named party to any pending legal proceedings, other than routine litigation deemed incidental to our business.

F-17

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Table of Contents

|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE
7  DISCONTINUED OPERATIONS

On January 20, 2004, the Company elected to be regulated as a business development company under the Investment Company Act of 1940 and decided to discontinue its operations of purchasing, training and selling of thoroughbred horses.  The operations related to thoroughbred horses have been shown as discontinued operations in the accompanying consolidated financial statements.

Revenues for this discontinued operation were $467,026 for the year ended December 31, 2003.  There were no significant operations for the period January 1, 2004 to January 20, 2004 and there was a gain of $3,636 recognized on the disposition of this operation during that period.

NOTE
8  RESTATEMENT OF FINANCIAL STATEMENTS

The Company has restated its previously issued 2004 consolidated financial statements for matters related to the following previously reported items: properly reflect the accounting for convertible notes, convertible preferred stock and the bifurcation of the related derivative liability pursuant to EITF Nos. 00-19, 05-02, 05-04 and SFAS No. 133; and the related income tax effects.  The accompanying consolidated financial statements for 2004 have been restated to reflect the corrections.

Year Ended ended December 31, 2004:

The following is a summary of the restatements for the year ended December 31, 2004:

|                                           | 
|------------------------------------------ | 
|
|                                           | 
|Net change in accrued derivative liability | 
|                                           | 
|                                           | 
|                                           | 

The following is a summary of the restatements for the year ended December 31, 2004:

|                                 | 
|-------------------------------- | 
|
|                                 | 
|Income tax effect of restatement | 
|                                 | 
|Total reduction of 2004 net loss | 
|                                 | 

The effect on the Companys previously issued 2004 financial statements are summarized as follows:

|                                           | 
|------------------------------------------ | 
|
|                                           | 
|Balance Sheet:                             | 
|Total Assets                               | 
|Accrued derivative liability               | 
|Total current liabilities                  | 
|Total liabilities                          | 
|Additional paid-in capital                 | 
|Accumulated deficit                        | 
|Total stockholders deficit                | 
|                                           | 
|Statement of Operations:                   | 
|Change in accrued derivative liability     | 
|Total other income (expenses)              | 
|Net loss                                   | 
|Net loss attributed to common stockholders | 
|Net loss per share                         | 

F-18

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Table of Contents

|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The net loss for 2004 was originally $1,159,857, while the 2004 restated net loss is reported as $1,078,294, a decrease in net loss of $81,563.  This decrease in net loss related to the decrease in the accrued derivative liability.

On the 2004 balance sheet, the restatement resulted in an increase in current liabilities of $2,751,502 consisting of the following:  1) the recording of the accrued derivative liability of $1,205,602 and 2) the reclassification of the Series A, D and C convertible preferred stock to a current liability which amounted to $1,545,900.  In addition total stockholders deficit increased by $2,751,502 due to recording the beneficial conversion feature of the convertible debt and convertible preferred stock as a current liability and the reclassification of the Series A, D and E preferred stock as a current liability.

Three Months Ended ended March 31, 2005:

The following is a summary of the restatements for the three months ended March 31, 2005:

|                                           | 
|------------------------------------------ | 
|
|                                           | 
|Net change in accrued derivative liability | 
|                                           | 
|                                           | 
|                                           | 

The following is a summary of the restatements for the three months ended March 31, 2005:

|                                 | 
|-------------------------------- | 
|
|                                 | 
|Income tax effect of restatement | 
|                                 | 
|Total reduction of net loss      | 
|                                 | 

The effect on the Companys previously issued March 31, 2005 financial statements are summarized as follows:

|                                           | 
|------------------------------------------ | 
|
|                                           | 
|Balance Sheet:                             | 
|Total Assets                               | 
|Accrued derivative liability               | 
|Total current liabilities                  | 
|Total liabilities                          | 
|Additional paid-in capital                 | 
|Accumulated deficit                        | 
|Total stockholders deficit                | 
|                                           | 
|Statement of Operations:                   | 
|Change in accrued derivative liability     | 
|Total other income (expenses)              | 
|Net loss                                   | 
|Net loss attributed to common stockholders | 
|Net loss per share                         | 

The net loss for the three months ended March 31, 2005 was originally $174,169, while the restated net loss for the three months ended March 31, 2005 is reported as $65,086, a decrease in net loss of $109,083.  This decrease in net loss related to the decrease in the accrued derivative liability.

F-19

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Table of Contents

|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the March 31, 2005 balance sheet, the restatement resulted in an increase in current liabilities of $2,913,162 consisting of the following:  1) the recording of the accrued derivative liability of $1,213,262 and 2) the reclassification of the Series A, D and C convertible preferred stock to a current liability which amounted to $1,699,900.  In addition total stockholders deficit increased by $2,913,162 due to recording the beneficial conversion feature of the convertible debt and convertible preferred stock as a current liability and the reclassification of the Series A, D and E preferred stock as a current liability.

Six Months Ended ended June 30, 2005:

The following is a summary of the restatements for the six months ended June 30, 2005:

|                                           | 
|------------------------------------------ | 
|
|                                           | 
|Net change in accrued derivative liability | 
|                                           | 
|                                           | 
|                                           | 

The following is a summary of the restatements for the six months ended June 30, 2005:

|                                 | 
|-------------------------------- | 
|
|                                 | 
|Income tax effect of restatement | 
|                                 | 
|Total reduction of net loss      | 
|                                 | 

The effect on the Companys previously issued June 30, 2005 financial statements are summarized as follows:

|                                           | 
|------------------------------------------ | 
|
|                                           | 
|Balance Sheet:                             | 
|Total Assets                               | 
|Accrued derivative liability               | 
|Total current liabilities                  | 
|Total liabilities                          | 
|Additional paid-in capital                 | 
|Accumulated deficit                        | 
|Total stockholders deficit                | 
|                                           | 
|Statement of Operations:                   | 
|Change in accrued derivative liability     | 
|Total other income (expenses)              | 
|Net loss                                   | 
|Net loss attributed to common stockholders | 
|Net loss per share                         | 

The net loss for the six months ended June 30, 2005 was originally $383,157, while the restated net loss for the six months ended June 30, 2005 is reported as $195,350, a decrease in net loss of $187,807.  This decrease in net loss related to the decrease in the accrued derivative liability.

F-20

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Table of Contents

|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the June 30, 2005 balance sheet, the restatement resulted in an increase in current liabilities of $3,182,809 consisting of the following:  1) the recording of the accrued derivative liability of $1,345,609 and 2) the reclassification of the Series A, D and C convertible preferred stock to a current liability which amounted to $1,837,200.  In addition total stockholders deficit increased by $3,182,809 due to recording the beneficial conversion feature of the convertible debt and convertible preferred stock as a current liability and the reclassification of the Series A, D and E preferred stock as a current liability.

Nine Months Ended ended September 30, 2005:

The following is a summary of the restatements for the nine months ended September 30, 2005:

|                                           | 
|------------------------------------------ | 
|
|                                           | 
|Net change in accrued derivative liability | 
|                                           | 
|                                           | 
|                                           | 

The following is a summary of the restatements for the nine months ended September 30, 2005:

|                                 | 
|-------------------------------- | 
|
|                                 | 
|Income tax effect of restatement | 
|                                 | 
|Total reduction of net loss      | 
|                                 | 

The effect on the Companys previously issued September 30, 2005 financial statements are summarized as follows:

|                                           | 
|------------------------------------------ | 
|
|                                           | 
|Balance Sheet:                             | 
|Total Assets                               | 
|Accrued derivative liability               | 
|Total current liabilities                  | 
|Total liabilities                          | 
|Additional paid-in capital                 | 
|Accumulated deficit                        | 
|Total stockholders deficit                | 
|                                           | 
|Statement of Operations:                   | 
|Change in accrued derivative liability     | 
|Total other income (expenses)              | 
|Net loss                                   | 
|Net loss attributed to common stockholders | 
|Net loss per share                         | 

The net loss for the nine months ended September 30, 2005 was originally $532,432, while the restated net loss for the nine months ended September 30, 2005 is reported as $308,400, a decrease in net loss of $224,032.  This decrease in net loss related to the decrease in the accrued derivative liability.

On the September 30, 2005 balance sheet, the restatement resulted in an increase in current liabilities of $3,043,070 consisting of the following:  1) the recording of the accrued derivative liability of $1,313,670 and 2) the reclassification of the Series A, D and C convertible preferred stock to a current liability which amounted to $1,729,400.  In addition total stockholders deficit increased by $3,043,070 due to recording the beneficial conversion feature of the convertible debt and convertible preferred stock as a current liability and the reclassification of the Series A, D and E preferred stock as a current liability.

F-21

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Table of Contents

|PHOENIX
INTERESTS, INC. AND SUBSIDIARY(formerly Thoroughbred Interests, Inc.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedFOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE
9  SUBSEQUENT EVENTS

Subsequent to December 31, 2005, the Company:

     
issued 67,816,886 shares of common stock in exchange for the conversion of 1,501 shares of Series D preferred stock; and

     
issued 10,519,230 shares of common stock in exchange for the conversion of a convertible debenture of $27,350.

F-22

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