Shearson Financial Network (SHSN) 10QSB 2006 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(MARK ONE)

T QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal quarter ended September 30, 2006

000-32745

Commission File Number

SHEARSON FINANCIAL NETWORK, INC.

(Exact name of Registrant as Specified in its Charter)

Nevada	88-0471353
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

2470 St. Rose Parkway, Suite 314

Henderson, Nevada 89052

(Address of Principal Executive Offices including Zip Code)

(702) 547-7300

(Registrant's Telephone Number, Including Area Code)

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

Securities registered pursuant to Section 12(g) of the Act:

State the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date

240,112,210 shares of Common Stock outstanding as of September 30, 2006

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form l0-QSB, or any amendment to this Form 10-QSB

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes £ No T

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes £ No T

SHEARSON FINANCIAL NETWORK, INC.

FORM 10-QSB

September 30, 2006

TABLE OF CONTENTS

PART 1 - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheet -- As of September 30, 2006 (unaudited) and December 31, 2005 (audited)	3
	Consolidated Statements of Operations -- For the Three and Nine Months Ended September 30, 2006 and 2005 (unaudited)	4
	Consolidated Statements of Cash Flows -- For the Three and Nine Months Ended September 30, 2006 and 2005 (unaudited)	5
	Consolidated Statement of Stockholders’ Equity	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management Discussions and Analysis and Plan of Operations	13
Item 3.	Controls and Procedures	16
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Under Senior Securities	17
Item 4.	Submission of Matters to a vote of Security Holders	17
Item 5.	Other Information	18
Item 6.	Exhibits	19
Signatures		20

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SHEARSON FINANCIAL NETWORK, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2006 (unaudited)			December 31, 2005 (unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,404,067		$	21,401
Loans available for sale		32,127,126			831,200
Loan sale receivable		2,073,375			--
Accounts receivable		5,527,146			107,321
Prepaid and other current assets		1,386,405			433,281
Total current assets		42,518,120			1,393,203
Property and equipment, net		26,718,992			1,664,571
Other assets:
Goodwill		14,269,279			1,372,916
Other assets, net		927,007			--
Total other assets		15,196,286			1,372,916
Total assets	$	84,433,397		$	4,430,690
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses	$	1,189,463		$	1,690,101
Bridge notes payable		819,682			5,869,682
Stock subscription payable		--			--
Interest payable		307,920			140,794
Notes payable		1,160,183			333,173
Notes payable - related party		808,396			767,846
Line of credit		32,377,707			3,497,073
Total current liabilities		36,663,351			12,298,669
Total liabilities		36,663,351			12,298,669
Stockholders' equity (deficit):
Common stock, $0.001 par value, 500,000,000 shares authorized, 240,112,210 and 37,544,108 shares issued and outstanding at September 30, 2006 and December 31, 2005, respectively		240,112			37,544
Preferred Stock, $0.01 par value, $400.00 stated value,15,000,000 shares authorized, 110,625 shares issued and outstanding at September 30, 2006 and December 30, 2005, respectively44,250,000		44,250,000			--
Additional paid-in capital - Common stock		27,661,396			20,926,149
Accumulated deficit		(24,381,462	)		(28,831,673	)
Total stockholders' equity (deficit)		47,770,046			(7,867,979	)
Total liabilities and stockholders' (deficit)	$	84,433,397		$	4,430,690

The accompanying notes are an integral part of these financial statements

3

SHEARSON FINANCIAL NETWORK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

	Three Months Ended September 30, 2006			Three Months Ended September 30, 2005			Nine Months Ended September 30, 2006			Nine Months Ended September 30, 2005
Revenues
Loan origination and sale of mortgage loans	$	4,846,648		$	2,496,205		$	6,579,689		$	5,924,206
Marketing revenues and commissions		--			43,461			--			335,536
Rental income		--			(100	)		--			6,905
Data revenue		5,435,778			--			7,424,049			--
Total revenue		10,282,427			2,539,565			14,003,738			6,266,648
Cost of sales		2,310,590			793,452			3,107,877			2,500,938
Gross profit		7,971,837			1,746,113			10,895,861			3,765,710
Expenses
Salary, wages and payroll taxes		4,460,497			939,073			7,637,313			2,153,125
Selling, general and administrative		1,861,082			972,875			2,674,553			3,773,677
Professional fees		1,603,217			743,914			3,306,116			1,440,687
Depreciation expense		153,676			188,734			461,028			566,202
Total expenses		8,078,472			2,844,596			14,079,011			7,933,691
Income (loss) from operations		(106,635	)		(1,098,483	)		(3,183,149	)		(4,167,981	)
Other (expense) income
Interest income		--			--			99,629
Interest expense		(86,922	)		(404,768	)		(184,855	)		(458,936	)
Debt discount expense		--			(414,878	)		--			(2,904,110	)
Forgiveness of debt		2,668,216			--			7,818,216			--
Total other (expense) income		2,581,293			(819,646	)		7,633,361			(3,363,046	)
Income (loss) before minority shareholder interest		2,474,658			(1,918,128	)		4,450,211			(7,531,027	)
Income (loss) applicable to minority shareholder interest		--			(2,816	)		--			42,165
Net income (loss)		2,474,658			(1,920,945	)		4,450,211			(7,488,862	)
Dividends on preferred shares		--			--			--			(69,481	)
Net income (loss) applicable to common shareholders	$	2,474,658		$	(1,920,945	)	$	4,450,211		$	(7,558,343	)
Net income (loss) per share, basic and diluted	$	0.02		$	(0.08	)	$	0.04		$	(0.34	)
Net loss per common share, applicable to common shareholders, basic and diluted	$	0.02		$	(0.08	)	$	0.04		$	(0.34	)
Weighted average number of common shares outstanding, basic and diluted		117,786,112			23,597,160			99,734,721			22,133,325

The accompanying notes are an integral part of these financial statements

4

SHEARSON FINANCIAL NETWORK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

	Nine Months Ended September 30, 2006			Nine Months Ended September 30, 2005
Cash flows from operating activities:
Net income (loss)	$	4,450,211		$	(7,488,862	)
Adjustments to reconcile net loss from operations to net cash used in operations:
Depreciation		461,028			566,202
Stock based expenses		5,229,926			2,130,578
Forgiveness of debt		(7,818,216	)		--
Debt discount		72,933			2,904,110
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(5,419,825	)		(115,922	)
(Increase) decrease in mortgage loans held for sale		(31,295,926	)		3,665,026
(Increase) decrease in unamortized debt discount		(927,007	)		--
(Increase) decrease in prepaid expenses		(953,124	)		(110,299	)
(Increase) decrease in goodwill		(12,896,363	)		--
(Increase) decrease in other assets		--			35,112
Increase (decrease) in accounts payable and accrued expenses		(500,638	)		(170,574	)
Increase (decrease) in stock payable		--			82,150
Increase (decrease) in interest payable		167,126			(6,396	)
(Increase) decrease in minority shareholder interest		--			(42,165	)
Net cash (used for) provided by operating activities		(49,429,813	)		1,448,960
Cash flows from investing activities:
Purchase of fixed assets		(25,433,283	)		(16,733	)
Net cash used in investing activities		(25,433,283	)		(16,733	)
Cash flows from financing activities:
Net advances on lines of credit		28,880,634			(1,667,087	)
Proceeds from related notes payable		40,550			250,000
Proceeds from notes payable		1,402,010			--
Payments of notes payable		(450,000	)		(13,352	)
Issuance of preferred stock		44,250,000			--
Issuance of common stock		202,568			29,655
Dividends paid on preferred shares of subsidiary		--			(69,481	)
Net cash provided by (used for) financing activities		76,245,762			(1,470,165	)
Net increase (decrease) in cash and cash equivalents		1,382,666			(37,938	)
Cash and cash equivalents, beginning of period		21,401			198,141
Cash and cash equivalents, end of period	$	1,404,067		$	160,203
Supplemental disclosure of cash flow information
Interest paid	$	--		$	--

The accompanying notes are an integral part of these financial statements

5

SHEARSON FINANCIAL NETWORK, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEAR ENDED DECEMBER 31, 2005 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2006

									Additional					Total
	Common Stock				Preferred Stock				Paid in		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
														(Deficit)
Balance December 31, 2005		37,544,108	$	37,544		--	$	--	$	20,926,149	$	(28,831,673	)	$	(7,867,979	)
Stock issued for services		85,588,272		85,588						3,466,693					3,552,281
Stock issued for debt		150,000		150						5,850					6,000
Stock issued for deferred compensation		24,431,120		24,431						932,814					957,245
Stock issued for AP settlement		10,510,000		10,510						409,890					420,400
Stock issued for acquisition		80,000,000		80,000						1,920,000					2,000,000
Preferred stock issued for acquisition						110,625		44,250,000							44,250,000
Exercise of warrant		1,725,911		1,726											1,726
Stock issuance		162,799		163											163
Net income		--		--		--		--		--		4,450,211			4,,450,211
Balance June 30, 2006		240,112,210	$	240,112		110,625	$	44,250,000	$	27,661,396	$	(24,381,462	)	$	47,770,046

The accompanying notes are an integral part of these financial statements

6

SHEARSON FINANCIAL NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(1) Basis of Presentation:

The unaudited financial statements as of September 30, 2006 included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. It is suggested that these financial statements be read in conjunction with the December 31, 2005 audited financial statements and notes thereto.

Since inception through September 30, 2006, the Company has suffered recurring losses from operations of approximately $24,381,462.  A substantial portion of the Company’s cumulative net loss is attributable to non-cash operating expenses and the Company is showing a net profit for the quarters ended September 30, 2006 and June 30, 2006, however until the Company can sustain its profitability, a substantial doubt exists about the Company’s ability to continue as a going concern.

(2) Principles of Consolidation:

The consolidated financial statements include the accounts of Shearson Financial Network, Real Properties Technologies, Allstate Funding Corp. and its subsidiary Shearson Home Loans. All significant inter-company accounts and transactions have been eliminated.

(3) Interim Period:

These financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. Operating results for the nine months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2006.

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the past fiscal year ended December 31, 2005, included in the Company’s Annual Report on Form 10-KSB/A.

Earnings per share have been calculated based upon the weighted average number of common shares outstanding during both reporting periods.

(4) Stock Issued for Services:

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counter party’s performance is complete or the date on which it is probable that performance will occur. For the nine months ended September 30, 2006, the amounts that have been charged against income for those services were approximately $5,229,926.

7

SHEARSON FINANCIAL NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(5) Goodwill:

The origin of Goodwill is from the purchase of:

Las Vegas Mortgage	$	1,372,916
Real Properties Technologies		9,152,757
eHome Credit		2,514,124
Allstate Funding Corp.		1,229,482
Total	$	14,269,279

The goodwill arose out of the difference between the purchase price and the fair market value of assets received.

In June of 2003, the Company acquired all of the outstanding stock of Las Vegas Mortgage in exchange for $100,000 in cash and $1,361,726 of the Company’s stock. The purpose of the transaction was to expand its interests in the Las Vegas market. Las Vegas Mortgage had branches and relationships in the Las Vegas Area. The Company had a call center in Las Vegas and wanted to get into the Mortgage Business in Las Vegas. This acquisition allowed the Company to have an immediate large position in Las Vegas.

On June 5, 2006 the Company acquired all the outstanding stock of Real Property Technologies ("RPT"), a New York corporation, for 100,000 shares of Series A-1 Convertible Preferred Stock  valued at approximately $40,000,000. The acquisition of RPT diversifies our mortgage operations and our mortgage banking capability via its extensive database of real property information.

On June 9, 2006, we agreed to acquire certain assets and defined liabilities of eHome CreditCorp. (“EHC”), a New York corporation, for 7,500 shares of Series A-1 Preferred Stock valued at approximately $3,000,000. The acquisition of EHC diversifies our mortgage operations and our mortgage banking capability and annualized it adds approximately $14 million per year in revenue to our mortgage group.

On July 29, 2006, Shearson Financial Network, Inc. (the "Company") entered into a Shares Exchange Agreement and Plan of Reorganization Agreement (the "Agreement") with Allstate Home Loans Inc. ("Allstate"), and the sole shareholder of all of the issued and outstanding shares of Allstate (the "Allstate Shareholder"). Pursuant to the Agreement, which closed on July 29, 2006, the Company is purchasing from the Company's sole shareholder 850 shares of Allstate's issued and outstanding shares of common stock. As of July 29, 2006, Allstate has 1,000 shares common stock that are issued and outstanding. The consideration for this purchase equaled 82,000,000 in common Stock and $1,250,000 in the Company's preferred stock, totaling $3,250,000.

The Company has adopted FASB 142. Under guidance of SFAS 142, net assets of companies acquired in purchase transactions are recorded at fair value at the date of acquisition, as such, the historical cost basis of individual assets and liabilities are adjusted to reflect their fair value. Identified intangibles are amortized on an accelerated or straight-line basis over the period benefited. Goodwill is not amortized, but is reviewed for potential impairment on an annual basis at the reporting unit level. The impairment test is performed in two phases. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. Of the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed. That additional procedure compares the implied fair value of the reporting units’ goodwill (as defined in SFAS 142) with the carrying amount of that goodwill. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value.

Other intangible assets are evaluated for impairment if events and circumstances indicate a possible impairment. Such evaluation of other intangible assets is based on undiscounted cash flow projections.

(6) Acquisition of Assets:

On June 5, 2006, we agreed to acquire all of the issued and outstanding shares of common stock of Real Property Technologies ("RPT"), a New York corporation ("RPT"), from its shareholders ("shareholders"), pursuant to the terms and conditions of a Share Exchange Agreement (the "Exchange Agreement") among SHAREHOLDERS, RPT and us. Pursuant to the Exchange Agreement, we exchanged 100,000 shares of our Series A-1 Convertible Preferred Stock  valued at approximately $40,000,000. Each share of the Series A-1 Convertible Preferred Stock has a stated value of four hundred dollars ($400.00). The acquisition of RPT diversifies our mortgage operations and our mortgage banking capability via its extensive database of real property information.

8

SHEARSON FINANCIAL NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

RPT is a leading real estate information company with headquarters in New York.  RPT reported revenues of approximately $24 million for fiscal year 2005 with pre tax profits of nearly four million dollars ($4,000,000) and has in excess of 200 employees. As part of the acquisition, certain key members of RPT's management will enter into employment agreements providing for a base compensation, plus bonuses based on future performance of the combined business. We plan to integrate RPT into Shearson Financial Network and operate RPT as a separate data network. RPT provides a steady revenue stream and profitability which the company looks to mitigate the effects of interest rate fluctuations in the mortgage lending market. The database has numerous marketing advantages for our mortgage operations.   

On June 9, 2006, we agreed to acquire certain assets and defined liabilities of eHome CreditCorp. (“EHC”), a New York corporation (“EHC”), from its shareholders (“shareholders”), pursuant to the terms and conditions of an Asset Purchase Agreement (the “Agreement”) among SHAREHOLDERS, EHC and us. Pursuant to the Agreement, we exchanged 7,500 shares of our Series A-1 Preferred Stock valued at approximately $3,000,000. Each share of the Series A-1 Preferred Stock has a stated value of four hundred dollars ($400.00). The acquisition of EHC diversifies our mortgage operations and our mortgage banking capability and it can add approximately $14 million per year in revenue to our mortgage group.

EHC is a leading mortgage banker with headquarters in Garden City, New York, and is licensed to lend in thirty-eight (38) states.. As part of the acquisition, certain key members of EHC’s management will enter into employment agreements providing for a base compensation, plus bonuses based on future performance of the combined business. We plan to integrate EHC into our previously completed acquisition of Shearson Homes Loans and use the brand name Shearson Home Loans for all of our mortgage operations. 

On July 29, 2006, Shearson Financial Network, Inc. (the "Company") entered into a Share Exchange Agreement and Plan of Reorganization Agreement (the “Agreement”) with Allstate Home Loans Inc. (“Allstate”), and the sole shareholder of all of the issued and outstanding shares of Allstate (the “Allstate Shareholder”). Pursuant to the Agreement, which closed on July 29, 2006, the Company is purchasing from the Company’s sole shareholder 850 shares of Allstate’s issued and outstanding shares of common stock. As of July 29, 2006, Allstate had 1,000 shares common stock that are issued and outstanding.

Pursuant to the Agreement, the Company issued the Allstate Shareholder $2,000,000 worth of the Company’s common stock at a price of $0.025 per share, the closing price per shares of the Company’s common stock on July 29, 2006 and, as a result, the Company issued the Allstate Shareholder 80,000,000 shares of its common stock.

Pursuant to the Agreement, the Company is assuming 50% of the debt owed to the Allstate Shareholder which shall be no greater than $1.25 million dollars. Pursuant to the Agreement, the Company, at its sole option, may immediately convert said debt any time after the July 29, 2006 (the “Closing”) , to three thousand (3,000) shares of Series A-1 Convertible Preferred Stock of the Company with a value of $400.00 per share. Said shares shall have a liquidation preference such that upon the investment funding by Barron Partners (or another such investment company in an amount in excess of ten million dollars) into the Company, holder may require the Company to liquidate the Series A-1 Convertible Preferred Stock into $1.25 million dollars in cash from the proceeds from said funding. In the event the Company does not secure an investment by Barron Partners (or another such investment company) within six months from the Closing , then the holders will have the right to convert the Series A-1 Convertible Preferred Shares into common stock at the conversion price of $0.025 per share for a total of 48 million shares. The Company will use its best efforts to cause a registration statement to be filed pursuant to the conversion of the shares into common stock.

9

SHEARSON FINANCIAL NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(7) Rescission of Acquisition:

On February 7, 2006, Consumer Direct of America agreed to sell Shearson Home Loans, Inc., a Nevada Corporation ("SHL"), and wholly owned subsidiary of Consumer Direct of America, Inc. ("CDA"), to Paragon Financial Corporation (PGNF), pursuant to the terms and conditions of a Share Exchange Agreement dated February 7, 2006 (the "Exchange Agreement") among CDA, SHL and PGNF. Pursuant to the Exchange Agreement, PGNF acquired all of the common stock of SHL for 149,558,791 shares of PGNF common stock and 79 shares of PGNF Series F Preferred Stock (convertible into 443,217,018 shares of PGNF Common Stock), valued at approximately $16,000,000. Each share of the Series F Preferred Stock automatically converts into 5,610,342 shares of PGNF common stock upon the filing of an amendment to PGNF articles. Immediately prior to entering into the Exchange Agreement, PGNF had 119,566,360 shares of PGNF common stock outstanding. In addition, PGNF had outstanding warrants to purchase 18,531,592 shares of PGNF common stock and outstanding debt convertible into 4,846,000 shares of PGNF common stock arriving at an exchange ratio of 4 to 1.

On May 5, 2006, the Company rescinded its acquisition agreement with PGNF. On February 7, 2006 the Company and PGNF entered into an acquisition agreement, whereby PGNF and the Company acquired all of the common stock of SHL for 149,558,791 shares of PGNF common stock and 79 shares of PGNF Series F Preferred Stock (convertible into 443,217,018 shares of PGNF Common Stock), valued at approximately $16,000,000. Each share of the Series F Preferred Stock automatically converts into 5,610,342 shares of PGNF common stock upon the filing of an amendment to PGNF articles, (the “Exchange”). The Exchange was never duly authorized and approved by the parties thereto, and each of the parties hereto desires to rescind the exchange. In connection with such rescission the Company transferred and assigned its shares of the PGNF capital stock and preferred stock to the PGNF shareholders and the PGNF shareholders transferred back its shares of the common stock of the Company. The Company views this rescission as nullification and accordingly has not included any operating activities related to PGNF in the Company’s consolidated financial statements.

(8) Forgiveness of Debt:

During the nine month period ended September 30, 2006, Club Vista Holdings, Inc. a nonrelated party, elected to write off three notes totalling $7,818,216 as of December 31, 2005, resulting in the forgiveness of debt. The Company reflected the debt forgiveness of $5,150,000 in the quarter ended June 30, 2006 and the remaining $2,668,216 during the quarter ended September 30, 2006.

(9) Preferred Stock:

The Board of Directors, by unanimous written consent, adopted a resolution providing for the issuance of up to one million (1,000,000) shares of the Corporation's Series A-1 Convertible Preferred Stock, par value $.0001 per share, which is designated "Series A-1 Convertible Preferred Shares," which have the following qualifications, limitations and restrictions of such preferences and rights:

1. Stated Value. The stated value per Series A-1 Convertible Preferred Share is Four Hundred Dollars ($400.00) per share (the "Stated Value").

2. Dividends. None.

3. Voting Rights. Each share of the Series A-1 Convertible Preferred Shares shall have 10,000 votes and shall vote upon all matters as a single class with the Corporation's common stock.

4. Conversion. Upon issuance, the Series A-1 Convertible Preferred Shares are not convertible until an amendment to the Corporation's Certificate of Incorporation is filed that increases the authorized shares of common stock. Upon filing and acceptance of the amendment pursuant to the General Corporation Law of the State of Nevada each share of Series A-1 Convertible Preferred Shares shall be converted into 10,000 shares of the Corporation's common stock.

5. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of Series A-1 Convertible Preferred Shares will be entitled to receive, prior and in preference to any distribution of the assets or surplus funds of the Corporation to the holders of any shares of common stock by reason of the ownership thereof, an amount equal to the fixed sum of the Stated Value per share and any accrued dividends thereof and no more (the "Preferential Amount"). Neither the merger or consolidation of the Corporation, nor the sale, lease or conveyance of all or part of its assets, shall be deemed to be a liquidation, dissolution or winding up of the affairs of the Corporation, either voluntarily or involuntarily, within the meaning of this section.

10

SHEARSON FINANCIAL NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

6. Rank. All Series A-1 Convertible Preferred Shares shall rank (A), prior to the Corporation's common stock; (B) prior to any class or series of capital stock of the Corporation hereafter created, unless such class or series of capital stock specifically, by its terms, ranks senior to or pari passu with such issuance; and (C) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms,

(10) Convertible Debenture:

On June 30, 2006, the Company entered into a Securities Purchase Agreement, (“Agreement”), by and among the Company, AJW Partners, LLC (“Partners”), AJW Offshore, Ltd. (“Offshore”), AJW Qualified Partners (“Qualified”) and New Millenium Capital Partners, II, LLC (“Millenium”). Partners, Offshore, Qualified and Millenium are collectively referred to as the “Purchasers”. The Agreement provides for the sale by the Company to the Purchasers of Secured Convertible Term Notes (the “Notes”) issued by the Company in the aggregate principal amount of $1,500,000 (“Principal Amount”). The Principal Amount is to be funded by the Purchasers in three traunches $500,000 on July 24, 2006, $500,000 upon filing the Registration Statement and $500,000 upon effectiveness of the Registration Statement. The offering of Notes under the Agreement was made pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Notes matures three years from the date of each Notes, bear interest at 6% per annum, unless the common stock of the Company is greater than $0.025 per share for each trading day of a month, in which event no interest is payable during such month, and principal and interest due at maturity. The Notes are convertible into common stock of the Company at 50% discount to the average of the three lowest trading prices of the common stock during the 20 trading day period prior to conversion. In connection with the subject offering, the Company issued an aggregate of 30,000,000 warrants (10,000,000 upon each traunch of financing) to purchase common stock at a price of $0.02 per share. The warrants are exercisable for a period of five years. The Company has the right to redeem the Notes under certain circumstances and the right to prevent conversions in any month where the stock price is less than $0.05 per share. The conversion of the Notes is subject to an effective Registration Statement to be filed by the Company. In the event the Company is unable to have the Registration Statement declared effective within the timeframe of the Agreement, we may be required to pay to the Note Holders an amount equal to the then outstanding principal amount of the Notes multiplied by two hundredths (.02) times the sum of: (a) the number of months (prorated for partial months) after the filing date or the end of the one hundred and eighty day period and prior to the date the Registration Statement is declared effective, (b) the number of months (prorated for partial months) that sales of all of the shares registered cannot be made after the Registration Statements is declared effective and (c) the number of months (prorated for partial months) that the common stock is not listed or included for quotation or the OTCBB, NASDAQ Small Cap, NYSE or AMEX or that trading has been halted after the Registration has been declared effective. If thereafter, sales could not be made pursuant to the Registration Statement, for an additional period of one month, the Company shall pay an additional $5,000 for each $250,000 of outstanding principal under the Notes. Further, any amounts owing to the investors shall be paid in cash or, at the Company’s option, shares of common stock priced at 50% discount to the market price. As of September 30, 2006, the management of the Company believes the Registration Statement will be declared effective within the timeframe of the Agreement. In the event the Registration Statement is not declared effective within the required timeframe, the Company will record any penalties incurred at such time. The Agreement contains a conversion limit which limits the ability of the Purchasers to convert the Notes to not exceed 4.99% of the Company’s outstanding shares of common stock at any given time.

As of September 30, 2006, the Company has received the 1^st and 2^nd traunch totaling $1,000,000 of the Notes and considers two thirds of the 30,000,000 warrants or 20,000,000 granted.

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SHEARSON FINANCIAL NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

The Company has determined the Notes contains a beneficial conversion feature and qualifies for treatment under Emerging Issue Task Force No. 00-27. The estimated fair value of the detachable warrants of $421,166 has been determined using Black-Scholes option pricing model using the following assumptions: stock price volatility ranging from 340% to 343%, risk free interest rate of 5.15%; dividend yield of 0% and 3 year term. The face amount of the Notes of $1,000,000 was proportionately allocated to the Notes and the warrants in the amount of $704,162 and $295,838, respectively. The Notes’ proportionate allocated value of $704,162 was then further allocated between the Notes and the beneficial conversion feature, which the entire remaining value of $704,162 was allocated to the beneficial conversion feature. The combined total value of the warrant and beneficial conversion feature of $1,000,000 has been accounted for as a debt discount which is being amortized and treated as interest expense over the term of the Notes. For the nine months ended September 30, 2006, the Company amortized a total of $72,993.

(11) Related-Party Transactions:

On January 21, 2005, the Company borrowed $125,000 from its Chief Financial Officer, Wayne Bailey.

During the month of December 2005, the Company entered in to financing agreement with Eclipse Holding Company, which is 50% owned by the Company’s Chief Executive Officer, Michael Barron. The Company entered into an agreement to borrow a total of $750,000 in the form of a note payable, with an interest of 10% per annum. At September 30, 2006, the outstanding balance on this note was $683,396. The agreement calls for the issuance of common stock warrants. As of September 30, 2006 the Company issued 22,469,999 shares to Eclipse Holding Company.

(12) Subsequent Event:

On November 16, 2006, the Company rescinded its acquisition agreement with Continental Home Loans, Inc., (“CHL”) effective November 9, 2006. On June 7, 2006 the Company and CHL entered into an acquisition agreement, whereby the Company acquired all of the common stock of CHL for three million two hundred thousand dollars ($3,200,000) (the “Purchase Price”). The Purchase Price consisted of (i) $640,000 cash consideration. (ii) the Company’s issuance of shares of common stock equal on the Closing Date to two million five hundred sixty thousand dollars ($2,560,000) (the “Stock Consideration”), based on the closing sale price of the Purchaser’s Common Stock on the OTCBB on the day prior to the Closing Date. The Exchange was never duly authorized and approved by the parties thereto, and each of the parties hereto desires to rescind the exchange. In connection with such rescission the Company is released from all consideration. The Company views this rescission as nullification and accordingly has not included any operating activities related to CHL in the Company’s consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this document. This discussion contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. The Company^'s actual results could differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, as well as those discussed below under Factors Affecting Future Operating Results. The Company disclaims any obligation to update information contained in any forward- looking statement.

Overview

Shearson Financial Network Inc. SFN was incorporated in Las Vegas, Nevada in July 2000, and is the parent to two primary operating divisions, Shearson Home Loans and Real Property Technologies (RPT). Shearson Home Loans (SHL) is a direct-to-consumer mortgage broker and banker with revenues derived primarily from origination commissions and resale of whole loans earned on the closing of first and second mortgages on single-family residences. SHL currently employs over 500 people which are residential mortgage and/or real estate brokerage professionals. The Company is a consolidator of mortgage brokerages and integrates the brokerage companies into the Shearson Home Loans network and then banks the mortgages through its mortgage banking unit. The Company plans to continue its growth strategy through the acquisition and affiliation of mortgage brokerage firms who do not currently bank their own production. By providing more efficient services to these smaller firms, SHL can accrete loan volume without having to “organically” grow the business. Banking of the accreted loan volume generates windfall revenue to the Company. Thus the rate of growth of SHL’s revenue stream is dramatically accelerated. The Company has the infrastructure, systems, and operational management necessary to properly integrate these and many more acquisitions in order to establish a countywide network. The Company’s business plan is focused on the integration of over 200 mortgage brokerage offices into the SHEARSON mortgage network.

RPT is a leading real estate information company with headquarters in New York. RPT reported revenues of approximately $24 million for fiscal year 2005 with pre tax profits of nearly four million dollars ($4,000,000) and has in excess of 200 employees. RPT operates within the Shearson Financial Network as a separate data network. RPT provides a steady revenue stream and profitability which the company looks to mitigate the effects of interest rate fluctuations in the mortgage lending market. The database has numerous marketing advantages for our mortgage operations.

Results of Operations

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

The acquisitions of Real Property Technologies Inc. and the asset purchase of certain assets of eHome Credit occurred in June of 2006 and therefore the company is reporting three months of financial activity for each of these companies for the three month reporting period. The acquisition of Allstate Funding Corp occurred on July 27, 2006 and the financials represents two months of operations.

Net revenues from origination and/or sale of loans increased 90.8% or $2.3 million, to $4.8 million for the quarter ended September 30, 2006 from $2.5 million for the quarter ended September 30, 2005. The increase in revenues is directly related to the Company’s acquisitions of Real Properties Technologies, Inc., Allstate Funding Corp. and eHome Credit Corp., (“Acquired Companies”) of which revenues totaled approximately $4.6 million. Data base revenue income from RPT was $5.4 million for the quarter ended September 30, 2006.

Gross profit increased $2.3 million or 296% to $3.1 million for the quarter ended June 30, 2006 from $793,785 for the quarter ended June 30, 2005. All of the increase is related to the Company’s acquisitions of Real Properties Technologies, Inc., Continental Home Loans and eHome Credit Corp.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Salary, wages and payroll taxes increased $3.5 million or 226%, from $939,000 for the quarter ended September 30, 2005, to $4.5 million for the quarter ended September 30, 2006. Approximately $4.1 million related to the acquired Companies, offset by a decrease of $600,000 related to a reduction in work force. Selling , general administrative (“SGA”) fees increased $888,000 to $1.9 million from $972,000 for the quarter ended September 30, 2005. The acquired companies increased SGA by $1.6 million. Professional fees increased $859,000 to $1.6 million from $ 744,000 for the quarter ended September 30, 2005. The increase in professional fees is related to the costs of the acquisitions and costs of debt placement.

Total operating expenses increased 184.0% or $5.2 million, to $8.1 million for the quarter ended September 30, 2006 from $2.8 million, for the quarter ended September 30, 2005. The increase of $5.8 million is related to the acquired companies and is offset by a decrease in expenses of $600,000.

For the quarter ended September 30, 2006, one note totaling approximately $2.7 million between Club Vista Holdings, Inc and the Company was recorded as forgiven, of which Club Vista recorded this debt forgiveness on December 31, 2005. The Company incurred costs associated with the debt discount amortization related to the beneficial conversion features on three of its notes in the amount of $1,244,616 for the three months ended September 30, 2005, as compared to $72,993 for the three months ended September 30, 2006.

We had a net income of $2.5 million for the quarter ended September 30, 2006 compared to net loss of $1.9 million for the same quarter of 2005. The increase in income is related to an increase in net operating income of $992,000 related to the Company’s acquisitions $2.7 million forgiveness of notes payable, offset by the $415,000 charged to debt discount expense and interest of $404,768 for the September 30, 2005 quarter.

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

Net revenues from origination and/or sale of loans increased 5% or $313,000, to $6.6 million for the nine months ended September 30, 2006 from $6.3 million for the nine months ended September 30, 2005. The increase in revenues is directly related to the Company’s acquisitions of Allstate Funding Corp and eHome Credit Corp., (“Acquired Companies”) of which revenues totaled approximately $5.7 million, offset by a decrease in revenues due to the sale of Ocean West of which attributed to $5.0 million. Revenues from RPT, representing income from database sources contributed $7.4 million to totaled revenues.

Gross profit increased 189.3% or $7.1 million, to $10.9 million for the nine months ended September 30, 2006 from $3.8 million for the nine months ended September 30, 2005. The increase is related to the Company’s acquisitions of Real Properties Technologies, Inc., which attributed to $6.5 million.

Salary, wages and payroll taxes increased 254.7% or $5.5 million, from $2.2 million for the nine months ended September 30, 2005, to $7.6 million for the nine months ended September 30, 2006. Approximately $5.8 million related to the acquired Companies. Selling, general administrative (“SGA”) fees decreased 29.1% or $1.0 million, to $2.7 million from $3.8 million for the nine months ended September 30, 2005. The acquired companies increased SGA by $2.0 million offset by a decrease in expenses from the sale of Ocean West of approximately $3.0 million. Professional fees increased 155% or $1.9 million to $3.3 million from $1.4 million for the nine months ended September 30, 2005. The increase in professional fees is related to the costs of the acquisitions and costs associated with debt placement.

Total operating expenses increased 77.5% or $6.1 million, to $14.0 million for the nine months ended September 30, 2006 from $7.9 million, for the nine months ended September 30, 2005. The increase of $8.0 million is related to the acquired companies and is offset by a decrease in expenses from the sale of Ocean West.

For the nine months ended September 30, 2006, three notes totaling $7.8 million between Club Vista Holdings, Inc and the Company were forgiven. The Company incurred costs associated with the debt discount amortization related to the beneficial conversion features on three of its notes in the amount of $2.9 million for the nine months ended September 30, 2005, as compared to $72,993 for two notes, for the nine months ended September 30, 2006.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

We had a net income of $4,450,000 for the nine months ended September 30, 2006 compared to net loss of $7,558,000 for the nine months ended September 30, 2005. The increase in income is related to $7.8 million forgiveness of notes payable, $2.0 million of net income from its acquisitions offset by the $2.5 million charged to debt discount expense and a loss of income associated with Ocean West, for the nine months ended September 30, 2006.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support asset growth, satisfy disbursement needs, maintain reserve requirements and otherwise operate on an ongoing basis. If our loan volume were to increase too rapidly, we believe the increase could have a severe impact on our liquidity. Our warehouse credit facilities limit the amount that may be advanced on each loan funded. Therefore, cash must be used to fund the additional dollars needed to close escrow. Thus, it is crucial that we closely monitor our loan volume.

During the first nine months of fiscal 2006 and 2005 we had net cash (used in) provided by operating activities of ($49.4 million) and $1.4 million, respectively. The primary sources of net cash used in operating activities was stock based expenses of $5.2 million, forgiveness of debt of $7.8 million, debt discount expense of $72,933, increase in accounts receivable of $5.4 million, Increase of mortgage loans held for sale of $31.3 million, increase in unamortized debt discount of $927,000, increase in prepaid expenses of $953,124, increase in goodwill of $12.9 million, decrease in accounts payable of $500,638 and an increase in interest payable of $167,126. The primary sources of net cash provided by operating activities was a decrease in receivables from loan sold of $3.6 million, debt discount expense of $2.9 million relating primarily to beneficial conversion debt discount, decrease accounts payable of $170,574, decrease in other assets of 35,112, stock based expenses of $2.1 million, increase in prepaid expenses of 110,299, increase in accounts receivable of $115,922, increase in minority shareholder interest of $42,165, increase in stock subscription payable of $82,150 and a decrease in interest payable of $6,396 for the nine month period ending September 30, 2005. As investors purchase loans, the amounts advanced for such loans through the warehouse lines of credit are paid. At that time, the receivables are cleared and the cash deposited in our operating account. These accounts vary significantly depending upon where the bulk of the loans are in the process of funding and selling.

Net cash used for investing activities during the first nine months of fiscal 2006 was $25.4 million primarily related to fixed assets purchased by acquisitions, which occurred during the period. Net cash used for investing activities during the first nine months of fiscal 2005 was $16,733 which was attributable to the purchase of property and equipment.

Net cash provided by financing activities for the nine months ended September 30, 2006 was $76.2 million. The consisted of $28.8 million on advances from lines of credit, proceeds related to related notes payable of $40,550, proceeds of notes payable of $1.4 million, payments of notes payable of $450,000 and issuance of preferred stock of $44.3 million. Net cash provided by financing activities for the nine months ended September 30, 2005 was $1.5 million. This consisted primarily of net payments under the warehouse lines of credit of $1.7 million, net payments of notes payable of $13,252, proceeds of notes payable related party of $250,000, issuance of common stock of $29,655, as well as dividends paid of $69,481.

Regulatory Trends

The regulatory environments in which we operate have an impact on the activities in which we may engage, how the activities may be carried out and the profitability of those activities. Therefore, changes to laws, regulations or regulatory policies can affect whether and to what extent we are able to operate profitably. For example, proposed state and federal legislation targeted at predatory lending could have the unintended consequence of raising the cost or otherwise reducing the availability of mortgage credit for those potential borrowers with less than prime-quality credit histories, thereby resulting in a reduction of otherwise legitimate sub-prime lending opportunities.

Forward-Looking Statements

Statements contained in this Form 10-QSB that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as “believes,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements or events, or timing of events, to differ materially from any future results, performance or achievements or events, or timing of events, expressed or implied by such forward-looking statements. We cannot assure that we will be able to anticipate or respond timely to the changes that could adversely affect our operating results in one or more fiscal quarters. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results may result in fluctuations in the price of our securities.

In the event we need to raise additional financing, there can be no assurance that any such financing will be available on acceptable terms. If such financing is not available on satisfactory terms, we may be unable to expand or continue our business as desired and operating results may be adversely affected. Debt financing will increase expenses and must be repaid regardless of operating results. Equity financing could result in dilution to existing stockholders.

Some of the more prominent known risks and uncertainties of our business are set forth below. However, this section does not discuss all possible risks and uncertainties to which we are is subject, nor can it be assumed that there are not other risks and uncertainties which may be more significant.

· Our losses from period to period;

· Our failure to continue to be an approved FHA mortgagee;

· Our dependence on the warehouse lines of credit which has been reduced ;

· Our need for additional funding sources so that our ability to originate and fund loans is not impaired and

· Our ability to compete with banks and other mortgage lenders that are significantly larger.

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Item 3. Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company that is required to be included in the Company's periodic filings with the Securities and Exchange Commission. There have been no significant changes in the Company's internal controls or, to the Company's knowledge, in other factors that could significantly affect those internal controls subsequent to the date the Company carried out its evaluation, and there have been no corrective actions with respect to significant deficiencies and material weaknesses.

The Company's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost- effective control system, misstatements due to error or fraud may occur and not be detected.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are party to claims from time to time, not required to be disclosed in accordance with Item 103 of Regulation S-B. While management currently believes that the ultimate outcome of these proceedings, individually and In the aggregate, will not have a material adverse effect on our financial position or results of operations, litigation is subject to inherent uncertainties.

On April 14, 2004, the Company commenced an action against Consulting Services LLC. On April 19, 2004, Consulting Services LLC instituted a counterclaim against the Company. Both claims are considered by the parties to be of a breach of contract nature from a certain Asset Acquisition Agreement in which the Company claims never consummated therefore services are not liable under the agreement. The counterclaims of a similar nature which CDA is claiming no liability and Consulting Services LLC is asking for the amount of stock agreed to be given for services per the acquisition agreement of approximately 2.7 million shares of the Company's stock valued at the time to be approximately $1.8 million and $655,321 for certain liabilities the Company were to assume per the agreement upon closing. The Company is asserting its position of no liability and asking for approximately $712,879 of which was advanced to Consulting Services prior to the knowledge that the transaction was not to close. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our results of operations of the period in which the ruling occurs. The estimate of the potential impact on our financial position or overall results of operations for the above legal proceedings could change in the future.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the nine months ended September 30, 2006, the Company issued shares of its common stock to the following:

· 24,431,120 shares issued to employees as deferred compensation with a total value of $932,814.

· 10,510,000 shares issued to individuals as settlement of accounts payable with a total value of $409,890.

· 85,588,272 shares issued to individuals for legal and consulting services with a total value of $3,466,693.

· 150,000 shares issued to an individual as settlement of debt with a total value of $5,850.

· 80,000,000 shares issued for acquisition of Allstate Funding Corp.

Item 3. Defaults Under Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

During the nine months ended September 30, 2006, the Company solicited consents of its shareholders and the results were as follows:

To approve an amendment to the Company Articles of Incorporation to increase the number of shares of Common Stock authorized to be issued from 100,000,000 shares to 500,000,000 shares.

Consent - 52,900,381 Against - 16,183,433 Abstain - 675

To approve an amendment to the Company’s Articles of Incorporation to effect a name change to Shearson Financial Network, Inc.

Consent - 52,900,381 Against - 16,183,433 Abstain - 675

Item 5. Other Information.

None.

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Item 6. Exhibits

Description of Exhibit	Exhibit No.
302 Certifications	31
(i) Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	31.1
(ii) Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	31.2
9906 Certifications	32
(i) Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**	32.1

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SIGNATURES

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

		SHEARSON FINANCIAL NETWORK, INC.
Date:	November 20, 2006
		By:	/s/ Michael A. Barron
			Michael A. Barron
			Chief Executive Officer
Date:	November 20, 2006
		By:	/s/ Theresa Carlise
			Theresa Carlise
			Chief Financial Officer (Principal Accounting Officer)

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