UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





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





For the
quarterly period ended September 30,
2008





 ̈         TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





Commission
file number 000-29315







RUBICON
FINANCIAL INCORPORATED


(Exact
name of registrant as specified in its charter)





Delaware
            13-3349556(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)





19200
Von Karman Avenue


Suite
350


Irvine,
California 92612


(Address
of principal executive offices)





(949)
798-7220


(Registrant’s
telephone number, including area code)





Copies of
Communications to:


Stoecklein
Law Group


402 W.
Broadway, Suite 690


San
Diego, CA  92101


(619)
704-1310


Fax (619)
704-1325





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 x       No
 ̈








Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
accelerated filer  ̈                                                                                                                                Accelerated
filer  ̈





Non-accelerated
filer  ̈  (Do
not check if a smaller reporting company)Smaller reporting company x





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





The
number of shares of Common Stock, $0.001 par value, outstanding on November 18,
2008, was 12,478,162 shares, which includes 501,389 shares authorized but
unissued.








PART
1 – FINANCIAL INFORMATION





Item
1. Financial Statements


Rubicon
      Financial IncorporatedCondensed
      Consolidated Balance SheetsSeptember
      30,
            
            
            December
      31,2008
            
            
            2007Assets
            
            (Unaudited)
            
            
            (Audited)Current
      assets:Cash
            
            $
            474,218
            
            
            $
            1,892,541Restricted
      cash
            
            
            200,000
            
            
            
            -Marketable
      securities
            
            
            665,800
            
            
            
            956,000Accounts
      receivable
            
            
            402,228
            
            
            
            -Prepaid
      expenses
            
            
            1,951,425
            
            
            
            2,969,412Notes
      receivable
            
            
            100,000
            
            
            
            -Notes
      receivable – related party
            
            
            24,202
            
            
            
            5,192Other
      current assets
            
            
            357,728
            
            
            
            800Total
      current assets
            
            
            4,175,601
            
            
            
            5,823,945Fixed
      assets, net of accumulated depreciation of $122,234 and $14,633,
      respectively
            
            
            136,735
            
            
            
            59,104Other
      assets:Deposits
            
            
            16,554
            
            
            
            -Intangible
      assets – customer lists, net of amortization of $82,612
            
            
            2,395,701
            
            
            
            -Long-term
      investments
            
            
            33,243
            
            
            
            175,000Total
      other assets
            
            
            2,445,498
            
            
            
            175,000Total
      assets
            
            $
            6,757,834
            
            
            $
            6,058,049Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Accounts
      payable
            
            $
            210,288
            
            
            $
            79,775Accrued
      expenses
            
            
            599,740
            
            
            
            23,352Investment
      obligation
            
            
            487,000
            
            
            
            104,000Deferred
      revenue
            
            
            212,744
            
            
            
            35,109Current
      portion of capital lease
            
            
            12,335
            
            
            
            -Accrued
      interest payable – related party
            
            
            65,154
            
            
            
            54,493Notes
      payable – related party
            
            
            160,539
            
            
            
            160,539Total
      current liabilities
            
            
            1,747,800
            
            
            
            457,268Long-term
      capital lease
            
            
            1,633
            
            
            
            -Stockholders’
      equityPreferred
      stock, $0.001 par value, 10,000,000 sharesauthorized,
      no shares issued and outstanding
            
            
            -
            
            
            
            -Preferred
      stock owed but not issued, 62,500 and zero as of September 30,
      2008
              and
      December 31, 2007, respectively
            
            
            63
            
            
            
            -Common
      stock, $0.001 par value, 50,000,000 sharesauthorized,
      11,976,773 and 10,724,273 shares issued and outstandingas
      of September 30, 2008 and December 31, 2007, respectively
            
            
            11,977
            
            
            
            10,724Common
      stock owed but not issued, 501,389 and 559,790as
      of September 30, 2008 and December 31, 2007, respectively
            
            
            501
            
            
            
            559Additional
      paid in capital
            
            
            17,820,950
            
            
            
            15,077,054Other
      comprehensive (loss)
            
            
            (460,662
            )
            
            
            (359,000
            )Accumulated
      (deficit)
            
            
            (12,364,428
            )
            
            
            (9,128,556
            )Total
      stockholders’ equity
            
            
            5,008,401
            
            
            
            5,600,821Total
      liabilities and stockholders’ equity
            
            $
            6,757,834
            
            
            $
            6,058,049








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


1








Rubicon
      Financial IncorporatedCondensed
      Consolidated Statements of Operations(Unaudited)For
      the Three Months Ended
            
            
            For
      the Nine Months EndedSeptember
      30,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Revenue
            
            $
            2,063,896
            
            
            $
            112,077
            
            
            $
            2,863,399
            
            
            $
            245,778Expenses:Direct
      costs
            
            
            1,310,368
            
            
            
            77,997
            
            
            
            2,051,244
            
            
            
            141,625Consulting
            
            
            58,986
            
            
            
            913,780
            
            
            
            173,901
            
            
            
            1,004,655Professional
      fees
            
            
            79,215
            
            
            
            57,484
            
            
            
            244,805
            
            
            
            288,227Executive
      compensation
            
            
            442,717
            
            
            
            473,479
            
            
            
            2,126,582
            
            
            
            1,286,972General
      and administrative expenses
            
            
            510,575
            
            
            
            208,582
            
            
            
            1,218,074
            
            
            
            402,576Impairment
      of goodwill
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,234,200Depreciation
      and amortization
            
            
            76,852
            
            
            
            3,507
            
            
            
            115,872
            
            
            
            9,588Total
      expenses
            
            
            2,478,713
            
            
            
            1,734,829
            
            
            
            5,930,478
            
            
            
            5,367,843Net
      operating (loss)
            
            
            (414,817
            )
            
            
            (1,622,752
            )
            
            
            (3,067,079
            )
            
            
            (5,122,065
            )Other
      income (expense):Interest
      expense
            
            
            (3,197
            )
            
            
            (1,813
            )
            
            
            (6,457
            )
            
            
            (5,219
            )Interest
      expense - related party
            
            
            (3,489
            )
            
            
            (3,774
            )
            
            
            (11,290
            )
            
            
            (11,702
            )Interest
      income
            
            
            9,981
            
            
            
            1,707
            
            
            
            38,716
            
            
            
            38,059Interest
      income - related party
            
            
            -
            
            
            
            12,731
            
            
            
            -
            
            
            
            12,998Dividend
      income
            
            
            121,200
            
            
            
            -
            
            
            
            121,200
            
            
            
            -Other
      income
            
            
            1,714
            
            
            
            -
            
            
            
            44,555
            
            
            
            -Minority
      interest income (loss)
            
            
            -
            
            
            
            -
            
            
            
            (40,160
            )
            
            
            -Total
      other income (expense)
            
            
            126,209
            
            
            
            8,851
            
            
            
            146,564
            
            
            
            34,136Net
      (loss)
            
            
            (288,608
            )
            
            
            (1,613,901
            )
            
            
            (2,920,515
            )
            
            
            (5,087,929
            )Other
      comprehensive (loss)
            
            
            -
            
            
            
            -
            
            
            
            (315,000
            )
            
            
            -Total
      comprehensive (loss)
            
            $
            (288,608
            )
            
            $
            (1,613,901
            )
            
            $
            (3,235,515
            )
            
            $
            (5,087,929
            )Weighted
      average number of common sharesoutstanding
      - basic and fully diluted
            
            
            12,477,884
            
            
            
            13,298,252
            
            
            
            11,840,397
            
            
            
            13,682,296Net
      (loss) per share - basic and fully diluted
            
            $
            (0.02
            )
            
            $
            (0.12
            )
            
            $
            (0.27
            )
            
            $
            (0.37
            )














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





2





Rubicon
      Financial IncorporatedCondensed
      Consolidated Statements of Cash Flows(Unaudited)For
      the Nine Months EndedSeptember
      30,2008
            
            2007Cash
      flows from operating activitiesNet
      (loss)
            
            $
            (3,235,515
            )
            
            $
            (5,087,929
            )Adjustments
      to reconcile net (loss) tonet
      cash (used) in operating activities:Depreciation
      and amortization expense
            
            
            115,876
            
            
            
            9,588Impairment
      of goodwill
            
            
            -
            
            
            
            2,234,200Minority
      interest losses
            
            
            40,160
            
            
            
            -Amortization
      of prepaid  share-based compensation
            
            
            1,061,695
            
            
            
            -Shares
      and options issued for services
            
            
            737,764
            
            
            
            2,029,167Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (402,228
            )
            
            
            (6,172
            )Prepaid
      expenses
            
            
            (15,708
            )
            
            
            (175,234
            )Deposits
            
            
            -
            
            
            
            (2,400
            )Other
      assets
            
            
            (199,091
            )
            
            
            (30,263
            )Accrued
      interest receivable
            
            
            (3,205
            )
            
            
            (979
            )Accounts
      payable
            
            
            130,513
            
            
            
            (94,192
            )Accrued
      expenses
            
            
            576,388
            
            
            
            10,032Investment
      obligation
            
            
            (104,000
            )
            
            
            -Deferred
      revenue
            
            
            177,635
            
            
            
            18,728Accrued
      interest payable - related party
            
            
            10,661
            
            
            
            11,701Net
      cash (used) by operating activities
            
            
            (1,109,055
            )
            
            
            (1,083,753
            )Cash
      flows from investing activitiesProceeds
      for notes receivable
            
            
            -
            
            
            
            (10,000
            )Proceeds
      for notes receivable - related party
            
            
            -
            
            
            
            (26,700
            )Payments
      on notes receivable – related party
            
            
            (2,000
            )
            
            
            -Purchase
      of fixed assets
            
            
            (68,281
            )
            
            
            (16,595
            )Distribution
      of assets – related party
            
            
            89,716
            
            
            
            -Purchase
      of intangible assets
            
            
            (762,313
            )
            
            
            -Purchase
      of investments
            
            
            -
            
            
            
            (327,000
            )Net
      cash (used) by investing activities
            
            
            (742,878
            )
            
            
            (380,295
            )Cash
      flows from financing activitiesCash
      acquired with mergers
            
            
            388,610
            
            
            
            933,207Donated
      capital
            
            
            -
            
            
            
            456Proceeds
      from notes payable
            
            
            -
            
            
            
            795Payments
      on notes payable
            
            
            -
            
            
            
            (52,350
            )Payments
      from notes payable - related party
            
            
            -
            
            
            
            -Payments
      on notes payable – related party
            
            
            -
            
            
            
            (3,976
            )Preferred
      shares issued for cash
            
            
            75,000
            
            
            
            -Common
      shares issued for cash
            
            
            170,000
            
            
            
            -Net
      cash provided by financing activities
            
            
            633,610
            
            
            
            878,132Net
      increase (decrease) in cash
            
            
            (1,218,323
            )
            
            
            (585,916
            )Cash
      - beginning
            
            
            1,892,541
            
            
            
            1,901,124Cash
      - ending
            
            $
            674,218
            
            
            $
            1,315,208Supplemental
      disclosures:Interest
      paid
            
            $
            6,457
            
            
            $
            2,268Income
      taxes paid
            
            $
            -
            
            
            $
            -Non-cash
      financing activities:Shares
      and options issued for services
            
            $
            737,764
            
            
            $
            2,029,167Shares
      issued for investment
            
            $
            -
            
            
            $
            245,000Shares
      issued for acquisition
            
            $
            1,680,000
            
            
            $
            3,135,900


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


3


RUBICON
FINANCIAL INCORPORATED


Notes
to Unaudited Condensed Consolidated Financial Statements





NOTE
1- Summary of Significant Accounting Policies





Basis of
Presentation:





The
accompanying unaudited condensed consolidated financial statements reflect all
adjustments (consisting of normal recurring accruals) which are in the opinion
of management, necessary for a fair statement of the results of operations for
the interim period. The year-end condensed consolidated balance sheet data as of
December 31, 2007 was derived from the audited financial statements, but does
not include all disclosures required by accounting principles generally accepted
in the United States of America. The interim financial information and notes
thereto should be read in conjunction with the December 31, 2007 Form 10-K. The
results of operations for the nine months ended September 30, 2008 are not
necessarily indicative of results to be expected for the entire
year.





The
financial statements include those of: Rubicon Financial Incorporated
(“Rubicon”); and its wholly owned subsidiaries, Rubicon Financial Insurance
Services, Inc. (“RFIS”), Rubicon Real Estate and Mortgages, Inc. (“RREM”), Grant
Bettingen, Inc. (“GBI”) and Dial-A-Cup, Inc. (“DAC”). All significant
inter-company transactions and balances have been eliminated.





Recently Issued Accounting
Standards:


In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“FAS 141 (R)”) and SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements” (“FAS 160”). These standards aim to improve,
simplify, and converge internationally the accounting for business combinations
and the reporting of non-controlling interests in consolidated financial
statements. The provision of FAS 141(R) and FAS 160 are effective for the fiscal
year beginning January 1, 2009. Rubicon is currently evaluating the impact of
the provisions of FAS 141 (R) and FAS 160.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” (“FAS 161”). FAS 161 is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
the entity’s financial position, financial performance, and cash flows. The
provisions of FAS 161 are effective for the year ending December 31, 2008.
Rubicon is currently evaluating the impact of the provisions of FAS
160.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“FAS 162”).  FAS 162 sets forth the level of
authority to a given accounting pronouncement or document by category. Where
there might be conflicting guidance between two categories, the more
authoritative category will prevail. FAS 162 will become effective 60 days after
the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA
Professional Standards. FAS 162 has no effect on our financial position,
statements of operations, or cash flows at this time.





4





Concentration of credit risk
for cash deposits:


Financial
instruments that potentially subject Rubicon to credit risk consist principally
of cash deposits. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2008,
Rubicon had approximately $7,363 in excess of FDIC insured limits.





Reclassifications:


Certain
reclassifications have been made to the prior years’ financial statements to
conform to the current year presentation. These reclassifications had no effect
on previously reported results of operations or retained earnings.





NOTE
2 – Restricted Cash





As a
result of Rubicon’s acquisition of Grant Bettingen, Inc. (“GBI”), Rubicon
acquired $200,000 in cash residing in an impound account in the name of GBI. In
consideration of the application for continuation in management, FINRA required
GBI to maintain a restricted cash account in the amount of $200,000 for an
indefinite period of time for the sole purpose of ensuring GBI sufficiently
maintains its net capital requirements as prescribed by FINRA regulations. The
account is non-interest bearing.





NOTE
3 – Identifiable Intangible Assets





During
the nine months ended September 30, 2008 Rubicon consummated the acquisition of
100% of the outstanding common shares of GBI. As a result of the acquisition,
Rubicon identified intangible assets in the GBI customer lists valued at
approximately $2,442,313. In addition, RFIS purchased a customer list for the
purpose of seeking insurance business from the commercial trucking
industry.  The total purchase price was $36,000 and will be amortized
over a period of 10 years.  As of September 30, 2008, Rubicon recorded
amortization in the amount of $82,612 attributable to its intangible
assets.





NOTE
4 - Marketable securities





On
November 27, 2007, Rubicon entered into a Share Purchase Agreement with American
International Industries, Inc. (“AMIN”), whereby Rubicon agreed to issue
1,000,000 shares of its common stock in exchange for 200,000 shares of AMIN and
$1,000,000 in cash. Rubicon recorded marketable securities of $1,000,000,
representing the fair market value of AMIN’s common stock ($5 per share) on the
date of agreement. On August 8, 2008 AMIN issued a stock dividend equal to
40,000 shares of their common stock. The fair value of the dividend was
$121,200. On September 30, 2008, Rubicon evaluated the fair value of the
securities and recorded other comprehensive loss in the amount of $334,200 to
adjust the recorded value to the market value at the balance sheet
date.





5


NOTE
5 – Notes receivable





On April
18, 2008, Rubicon amended its $20,000 note receivable with its RREM subsidiary,
whereby Joel Newman, the former President of RREM accepted full liability for
the principal balance of $20,000. The amended terms require interest to accrue
at a rate of 6% per annum and mature on April 18, 2009. On March 18, 2008,
Rubicon received the initial payment of $898 representing principal in the
amount of $798 and interest of $100. The outstanding principal balance as of
September 30, 2008 was $19,202.





In
addition, Mr. Newman owes $5,000 in the form of a demand note, which accrues
interest at a rate of 6% per annum. As of September 30, 2008, the principal
balance owed was $5,000 and accrued interest receivable was $5,475.





On June
3, 2008, Rubicon issued a note receivable in the amount of $100,000 to Marc
Riviello pursuant to the “Stock Repurchase and Settlement Agreement” as
discussed in note 7. The note accrues interest at a rate of 6% per annum and is
due June 1, 2009. As of September 30, 2008 the principal balance was $100,000
and Rubicon accrued $2,000 in interest receivable.





NOTE
6 - Investments





Rubicon
maintains a 24.9% interest in Maximum Financial Investment Group, Inc. (“MFIG”).
Rubicon recorded its investment in accordance with the equity method, whereby
the carrying value of the investment is adjusted based on the net income or
losses and any dividends paid. During the nine month period ended September 30,
2008 Rubicon recorded minority interest losses totaling $16,757. The adjusted
value of its investment at September 30, 2008 was $33,243. On October 1, 2008,
MFIG withdrew its registration with FINRA and ceased all business. As a result,
we subsequently wrote off our entire investment of $33,243 in MFIG as of October
31, 2008.





On June
3, 2008, Rubicon entered into a Stock Repurchase and Settlement Agreement with
AIS Financial, Inc. (“AIS”) and Marc Riviello whereby Rubicon returned its
previously purchased 24.9% interest in AIS in exchange for the cancellation of
100,000 shares of Rubicon common stock and a note receivable from Mr. Riviello
in the amount of $100,000, representing the original amounts paid by Rubicon for
the acquisition of the minority interest in AIS. As a result of the repurchase
agreement, Rubicon reduced its minority interest losses in the amount of
$19,524.





On June
2, 2008, Rubicon completed the acquisition of GBI through the purchase of 100%
of GBI’s outstanding common shares. Prior to the consummation of the
acquisition, Rubicon maintained a 21% minority interest in GBI accounted for
under the equity method.





As of
September 30, 2008 Rubicon’s minority interest losses totaled
$40,160.





6


NOTE
7 – Related Party Transactions




Rubicon’s
operations were previously funded by the sole officer of DAC. As of September
30, 2008, total amounts loaned to Rubicon by this officer were $156,014. The
proceeds loaned have been used to fund operations and for the development of a
prototype of DAC’s beverage dispenser. The note bears interest of 10% per annum
and is due on demand. During the nine months ended September 30, 2008 and 2007,
Rubicon recorded $11,290 and $11,702, respectively of interest expense related
to the note. As of September 30, 2008, Rubicon had interest payable in the
amount of $66,197 in connection with this note.





On March
27, 2008, Rubicon entered into an employment agreement with its President,
Terence Davis. Pursuant to the agreement, Mr. Davis was to receive annual
compensation in the amount of $96,000 commencing on April 1, 2008 and expiring
on March 31, 2009. Effective November 15, 2008 Mr. Davis retired, as a result
his employment agreement was terminated.





On April
3, 2008, Rubicon entered into an agreement with the former President of RREM,
Joel Newman, whereby Rubicon agreed to extend Mr. Newman’s amended note an
additional one year period in exchange for a lock-up agreement on all 284,000
shares of Rubicon common stock currently held by Mr. Newman for a period of two
years expiring on March 15, 2010.





On June
2, 2008, GBI entered into a five (5) year employment agreement with Grant
Bettingen, the former principal and shareholder of GBI. Pursuant to the
agreement, Mr. Bettingen will receive annual compensation of $120,000 during the
first year of the agreement. For each subsequent year, the annual compensation
will increase at a rate of 10% per annum. In addition, Mr. Bettingen was granted
500,000 options to purchase Rubicon’s common stock at a price of $1 per share
for a period of five (5) years as a signing bonus. The fair value of the options
using the Black-Scholes pricing model was $699,764. The options are fully vested
and Rubicon recorded the full value as executive compensation as of September
30, 2008.





On June
24, 2008, Rubicon issued a total of 17,500 shares of its restricted common stock
to its Board of Director’s as compensation for their services. The fair value of
the shares issued was $28,000 and has been expensed as of September 30,
2008.




NOTE
8 – Stockholders’ equity





On April
8, 2008, Rubicon issued 45,000 shares of its common stock pursuant to previously
received subscription agreements.





During
the nine months ended September 30, 2008, Rubicon issued 85,000 shares of its
common stock pursuant to subscription agreements for cash totaling $170,000 or
$2 per share. Rubicon paid fees in connection with the sale of its common stock
totaling $26,000, which was deducted from the proceeds.




During
the nine months ended September 30, 2008, Rubicon issued 5,000 shares of its
common stock to an employee as a bonus for past services. The fair value of the
shares on the date of grant was $10,000, which was expensed as additional
compensation.


7





On March
31, 2008, Rubicon cancelled 13,401 shares previously authorized and unissued
pursuant to an agreement with its former Chief Financial Officer.





On June
2, 2008, Rubicon issued 1,200,000 shares of its common stock as partial
consideration for the acquisition of GBI. In addition, Rubicon granted Mr. Grant
Bettingen, the former stockholder and principal of GBI, an option to purchase
500,000 shares of Rubicon common stock at $1 per share for a period of five
years in connection with Mr. Bettingen’s employment agreement with
GBI.





On June
3, 2008, Rubicon entered into an agreement for the cancellation of 100,000
shares previously issued as partial consideration for its purchase of 24.9% of
the total outstanding shares of AIS pursuant to the Share Repurchase and
Settlement Agreement (see Note 6). As of September 30, 2008 the shares had not
been cancelled.





On June
24, 2008, Rubicon issued 17,500 shares of its restricted common stock to its
Board of Director’s for their services. The fair value of the shares was $28,000
and expensed as of June 30, 2008.





During
the three months ended September 30, 2008, we sold 62,500 shares of our
preferred stock to individuals for cash totaling $125,000, which was held in
escrow until the first closing of the private placement, which occurred in
October of 2008.





NOTE
9 – Warrants and Options





During
the three months ended March 31, 2008, Rubicon cancelled 200,000 options
previously granted to the former President of RREM, upon his resignation. The
options had not vested.





On June
2, 2008, Rubicon granted Mr. Grant Bettingen an option to purchase 500,000
shares of its common stock with an exercise price of $1 pursuant to his
employment agreement with GBI. The fair market value of the options based on the
Black-Scholes model is $699,764 using the following
assumptions:  Strike Price $1; Stock Price $1.40; Volatility 315%;
Term 5 years; Dividend Yield 0%; Interest Rate 3.25%.  We have
recorded executive compensation in the amount of $699,764.





A summary
of stock options and warrants as of September 30, 2008 is as
follows:





Options
            
            WarrantsOutstanding
      01/01/08
            1,500,000
            $1.79
            100,000
            $3.00Granted
            500,000
            1.00
            -
            -Cancelled
            (200,000)
            1.00
            -
            -Exercised
            -
            -
            -
            -Outstanding
      09/30/08
            1,800,000
            $1.66
            100,000
            $3.00Vested
      as of 09/30/08
            1,500,000
            $1.50
            100,000
            $3.00





8


NOTE
10 – Operating Segments





Rubicon’s
operating segments are evidence of its internal organization. The major segments
are defined by the type of financial services offered. Each segment operates in
a distinct industry: brokerage services (GBI), mortgage and real estate services
(RREM) and personal and commercial insurance services (RREM). DAC is currently
inactive and not considered an operating segment of Rubicon.





Where
applicable, “Corporate” represents items necessary to reconcile to the
consolidated financial statements, which generally include corporate activity
and eliminations.





Net
revenues as shown below represent commissions earned for each segment.
Intercompany revenues have been eliminated and are immaterial for separate
disclosure. Rubicon evaluates performance of individual operating segments based
on pre-tax income (loss). On a consolidated basis, this amount represents total
comprehensive loss as shown in the unaudited condensed consolidated statement of
operations. Reconciling items represent corporate costs that are not allocated
to the operating segments including; stock-based compensation expense and
intercompany eliminations.





Three
      Months Ended
            
            Nine
      Months EndedSeptember
      30,
            
            September
      30,2008
            
            2007
            
            2008
            
            2007Net
      RevenueInsurance
      services
            $
            89,756
            
            $
            56,129
            
            $
            234,667
            
            $
            189,830Mortgage
      services
            
            49,930
            
            
            55,948
            
            
            183,458
            
            
            55,948Brokerage
      services(1)
            
            1,924,210
            
            
            -
            
            
            2,445,274
            
            
            -2,063,896
            
            
            112,077
            
            
            2,863,399
            
            
            245,778Operating
      expensesInsurance
      services
            
            143,662
            
            
            120,550
            
            
            373,599
            
            
            244,353Mortgage
      services
            
            71,131
            
            
            113,992
            
            
            327,940
            
            
            172,145Brokerage
      services(1)
            
            1,553,188
            
            
            -
            
            
            3,236,624
            
            
            -Corporate
            
            710,732
            
            
            1,500,287
            
            
            1,992,315
            
            
            4,951,3452,478,713
            
            
            1,734,829
            
            
            5,930,478
            
            
            5,367,843Net
      operating (loss)
            $
            (414,817)
            
            $
            (1,622,752)
            
            $
            (3,067,079)
            
            $
            (5,122,065)





(1)
            Represents
      the period from June 2, 2008 (the date of the GBI acquisition through
      September 30, 2008).





9


NOTE
11 – Commitments





Employment
agreements


On March 27, 2008, Rubicon entered into
an employment agreement with its President, Terence Davis. Pursuant to the
agreement, Mr. Davis was to receive annual compensation in the amount of $96,000
commencing on April 1, 2008 and expiring on March 31, 2009. Effective November
15, 2008 Mr. Davis retired, as a result his employment agreement was
terminated.





On June
2, 2008, GBI entered into an employment agreement with Grant Bettingen, the
former principal and founding shareholder of GBI. Pursuant to the agreement, Mr.
Bettingen shall receive annual compensation in the amount of $120,000, subject
to 10% annual increases, for a period of five (5) years. In addition, Mr.
Bettingen will receive quarterly incentive compensation equal to 5% of all net
investment banking income and 10% incentive bonus on net investment income
referred directly by Mr. Bettingen. As an inducement to enter into the
agreement, Rubicon granted Mr. Bettingen and option to purchase up to 500,000
shares of its common stock as a signing bonus. The options are fully vested and
valued at $699,764 (see note 10).  Rubicon further agreed to provide a
monthly auto allowance in the amount of $1,000 and a life insurance policy with
death benefit of $1,000,000. GBI’s future commitment under this agreement is as
follows:





2009
            
            144,0002010
            
            157,2002011
            
            171,7202012
            
            187,6922013
            
            205,261Total
            
            $    865,873





Lease
agreements


The following is a schedule by years of
future minimum rental payments required under operating leases that have
non-cancelable lease terms in excess of one year as of September 30,
2008:





2008
            
            $ 
          60,2702009
            
            190,9862010
            
            15,915Total
            
            $    267,171





Rent expense is included in general and
administrative expense and totaled $214,824 and $53,027 for the nine months
ended September 30, 2008 and 2007, respectively.





10


Note
12 – Subsequent Events





In October of 2008, we issued 62,500
shares of Series A Convertible Preferred Stock previously sold for $125,000 in
cash.





On October 1, 2008, MFIG withdrew its
registration with FINRA and ceased all business. As a result, we subsequently
wrote off our entire investment of $33,243 in MFIG as of October 31,
2008.

















11


FORWARD-LOOKING
STATEMENTS





This
document contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than statements
of historical fact are “forward-looking statements” for purposes of federal and
state securities laws, including, but not limited to, any projections of
earnings, revenue or other financial items; any statements of the plans,
strategies and objections of management for future operations; any statements
concerning proposed new services or developments; any statements regarding
future economic conditions or performance; any statements or belief; and any
statements of assumptions underlying any of the foregoing.





Forward-looking
statements may include the words “may,” “could,” “estimate,” “intend,”
“continue,” “believe,” “expect” or “anticipate” or other similar words. These
forward-looking statements present Rubicon’s estimates and assumptions only as
of the date of this report. Accordingly, readers are cautioned not to place
undue reliance on forward-looking statements, which speak only as of the dates
on which they are made. Rubicon does not undertake to update forward-looking
statements to reflect the impact of circumstances or events that arise after the
dates they are made. You should, however, consult further disclosures Rubicon
makes in future filings of its Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.





Although
Rubicon believes that the expectations reflected in any of its forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed in any of its forward-looking statements. Rubicon’s future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and uncertainties. The
factors impacting these risks and uncertainties include, but are not limited
to:





·
            inability
      to raise additional financing for working
  capital;


·
            Rubicon’s
      ability to successfully compete in the financial services
      industry;


·
            deterioration
      in general or regional (especially Southern California) economic, market
      and political conditions;


·
            deterioration
      in both the lending markets and the real estate markets in
      general;


·
            actions
      and initiatives taken by both current and potential
      competitors;


·
            inability
      to locate potential mergers and acquisitions within the financial services
      industry and integrate acquired companies into our
      organization;


·
            the
      level of volatility of interest rates as well as the shape of the yield
      curve;


·
            the
      fact that Rubicon’s accounting policies and methods are fundamental to how
      it reports its financial condition and results of operations, and they may
      require management to make estimates about matters that are inherently
      uncertain;


·
            adverse
      state or federal legislation or regulation that increases the costs of
      compliance, or adverse findings by a regulator with respect to existing
      operations;


·
            changes
      in U.S. GAAP or in the legal, regulatory and legislative environments in
      the markets in which we operate;


·
            inability
      to efficiently manage
operations;


12


·
            inability
      to achieve future operating
results;


·
            the
      unavailability of funds for capital
  expenditures;


·
            ability
      to recruit and hire key employees;


·
            the
      inability of management to effectively implement strategies and business
      plans; and


·
            the
      other risks and uncertainties detailed in this
  report.





For a detailed description of these and
other factors that could cause actual results to differ materially from those
expressed in any forward-looking statement, please see “Risk Factors” in this
document and in Rubicon’s Annual Report on Form 10-K for the year ended December
31, 2007.





All
references in this report to “we,” “us,” “our,” “company” and “Rubicon” refer to
Rubicon Financial Incorporated and its wholly-owned operating subsidiaries,
Rubicon Financial Insurance Services, Inc., Rubicon Real Estate and Mortgages,
Inc. and Grant Bettingen, Inc., unless the context requires
otherwise.





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





Overview
of Current Operations





We are a
publicly-traded financial service holding company with three wholly-owned
operating subsidiaries: (i) Rubicon Financial Insurance Services, Inc. (“RFIS”),
a full service insurance agency offering personal lines, life and commercial
insurance products to individuals and companies primarily in California; (ii)
Rubicon Real Estate and Mortgages, Inc. (“RREM”), which provides professional
assistance in the fields of residential and commercial real estate and mortgage
loans in California; and (iii) Grant Bettingen, Inc. (“GBI”) a private brokerage
firm registered with the Financial Industry Regulatory Authority (“FINRA”)
providing retail brokerage services and investment banking





We also
have a non-operating subsidiary, Dial-A-Cup, Inc. (“DAC”), which has developed a
hot-water dispensing system that will brew one fresh cup of coffee, tea, hot
chocolate, soup, etc. on demand.  On July 31, 2007, we entered into a
Separation and Distribution Agreement with our DAC, whereby we agreed to
spin-out at least 50% of the shares of DAC common stock owned by us to our
shareholders on a one for ten basis.  The Separation and Distribution
Agreement also provides that DAC will take all of the businesses, assets and
liabilities relating to the DAC business previously held by us.  DAC
intends to file a registration statement on Form S-1 to register the shares of
DAC common stock to be distributed and the record date will be set as the
10th
day following effectiveness of the registration statement.  As of the
date of this filing, the Form S-1 has not been filed.





13


Overview of Financial
Services





We have
established our headquarters in Orange County, California to capitalize on the
perceived large and affluent demographic base for our products in the financial
services industry. The types of financial services we offer are: insurance, both
personal and commercial; mortgage loan and real estate services, both
residential and commercial; and retail brokerage services, securities market
making, as well as investment banking services for small to mid-sized companies.
Each subsidiary providing these services is an individually licensed corporation
doing business under the parent holding company, which is intended to allow us
to become a unique, single-source, financial services provider.





On June
15, 2007, we acquired a 24.9% interest in AIS Financial, Inc. (“AIS”) through
the issuance of 100,000 shares of our common stock and a cash payment of
$100,000 to its principal, Mr. Marc Riviello. On June 3, 2008, we entered into a
Stock Repurchase and Settlement Agreement with AIS and Marc Riviello whereby we
returned the 24.9% of AIS in exchange for the cancellation of 100,000 shares of
our common stock initially issued as partial payment of the purchase and an
unsecured promissory note from Mr. Riviello in the amount of $100,000. The note
bears interest at a rate of 6% per annum and matures on June 1, 2009. As of the
date of this report, the 100,000 shares have been cancelled.





We own a
24.9% interest in Maximum Financial Investment Group, Inc. (“Maximum”), a former
FINRA licensed broker/dealer that focused on wholesale and online trading. On
October 1, 2008, Maximum withdrew its registration with FINRA and ceased all
business. As a result, we subsequently wrote off our entire investment of
$33,243 in Maximum as of October 31, 2008.





As part
of our long term growth strategy, we continually evaluate our existing portfolio
of businesses as well as new business opportunities to ensure we are investing
in those businesses with the largest growth potential. In June of 2008, we
completed our acquisition of GBI. As we continue to expand our operations into
that of an independent boutique firm offering multiple financial services, we
intend to continue to acquire other financial service companies to enhance our
ability to be a single-source provider of financial services to our clientele,
with Rubicon being the holding company of these various financial services
entities. We intend to utilize a cross-marketing strategy between all of our
financial service subsidiaries to provide various product offerings to clients
with the ability to gather all the assets and financial services of clients
specific and customized to their needs.





Results
of Operations





The
following tables summarize selected items from the statement of operations for
the three and nine months ended September 30, 2008 and the comparable periods
ended September 30, 2007.





14


Revenue:


Three
      Months Ended
            
            Nine
      Months EndedSeptember
      30,
            %
            September
      30,
            %2008
            2007
            Change
            2008
            2007
            ChangeConsolidatedRevenue
            $2,068,896
            $112,077
            1746%
            $2,863,399
            $245,778
            1065%Operating
      expenses
            $2,478,713
            $1,734,829
            43%
            $5,930,478
            $5,367,843
            11%Net
      operating (loss)
            $(414,817)
            $(1,622,752)
            (74%)
            $(3,067,079)
            $(5,122,065)
            (40%)





Overall
revenues increased 1746% during the third fiscal quarter of 2008 and 1065%
during the nine months ended September 30, 2008. 2007 was targeted to be a year
of merger and acquisitions. In 2007 we acquired RFIS, RREM and the minority
interest in Maximum.  In 2008, we continued to explore additional
acquisition targets and consummated the acquisition of GBI during the second
fiscal quarter. Our significant revenue increase is the direct result of the
acquisition of GBI for the period from June 2, 2008 through September 30,
2008.





Revenue by
Segment





Three
      Months Ended
            
            Nine
      months EndedSeptember
      30,
            %
            September
      30,
            %2008
            2007
            Change
            2008
            2007
            ChangeRevenueInsurance
      services
            $89,756
            $56,129
            60%
            $234,667
            $189,830
            24%Mortgage
      services
            49,930
            55,948
            (11%)
            183,458
            55,948
            228%Brokerage
      services
            1,924,210
            -
            -
            2,445,274
            -
            -Total
      revenue
            $2,063,896
            $112,077
            
            $2,863,399
            $245,778





Insurance Services: RFIS
experienced an increase of 60% and 24% in revenues from insurance services for
the three and nine months ended September 30, 2008. RFIS earned $89,756 during
the third quarter compared to $56,129 over the same three month period in 2007.
This is the result of an augmented focus towards increasing the ratio of
commercial lines verses personal lines in its overall market base. RFIS believes
the commercial lines will provide greater ability to increase the insurance
services revenue stream as well as provide further stability to our long term
growth platform. RFIS anticipates a financial recognition of these efforts
through increased commission revenue during the third fiscal quarter of 2008.
RFIS’s nine month gross revenue increased by 24% or $234,667 compared to
$189,830 due to renewal revenue and increase in commercial policies during the
period ended September 30, 2008.





Mortgage Services: RREM was
acquired in May 2007 and had limited activity during the second quarter of 2007.
In 2008, RREM generated revenue through commissions earned on the sale of
residential real estate and mortgage brokerage services.  During the
three months ended September 30, 2008 we earned $49,930 in commissions compared
to $55,948 for the three month period in 2007. The current economic conditions
of the real estate market have limited RREM’s ability to generate revenue on the
sales of residential real estate. We have experienced an 11% decline in our
revenue for the three months ended September 30, 2008. We attribute the
decreased revenue to the overall declining market conditions. RREM has
introduced “loan modifications” to its existing portfolio of services in an
attempt to stabilize our earnings. RREM is continuing to seek additional sources
of revenue while also increasing its marketing area.


15


Brokerage Services: The
acquisition of GBI was completed on June 2, 2008 and accordingly we have only
included revenue from the date of consummation to September 30, 2008. GBI
represents our cornerstone of services and has contributed approximately 93% of
our total revenue in the third fiscal quarter and 85% for the nine-month period
ended September 30, 2008. Revenue for the period of June 2, 2008 to September
30, 2008 totaled $2,445,274. We anticipate significant increases in commission
revenue as we close the fourth fiscal quarter through an aggressive campaign to
build broker base and efforts to seek and add additional brokerage and
investment banking branches.





Selling
and Administrative Expenses:





Three
      Months Ended
            
            Nine
      months EndedSeptember
      30,
            %
            September
      30,
            %2008
            2007
            Change
            2008
            2007
            ChangeDirect
      costs
            $1,310,368
            $       77,997
            1580%
            $2,051,244
            $     141,625
            1348%Consulting
            58,986
            913,780
            (94%)
            173,901
            1,004,655
            (83%)Professional
      fees
            79,215
            57,484
            38%
            244,805
            288,227
            (15%)Executive
      compensation
            442,717
            473,479
            (8%)
            2,126,582
            1,286,972
            65%General
      expenses
            510,575
            208,582
            148%
            1,218,074
            402,576
            204%Depreciation
      and amortization
            76,852
            3,507
            2091%
            115,872
            9,588
            1109%Impairment
      of goodwill
            -
            -
            -
            -
            2,234,200
            -Operating
      expenses
            $2,478,713
            $  1,734,829
            43%
            $5,930,478
            $5,367,843
            11%





Operating overhead, excluding
impairments, increased 43% over the previous three month comparable period and
89% for the nine month comparable period ended September 30, 2008. Significant
increases were expected as we completed our acquisition schedule; employed full
time executive and administrative staff; and commenced operations in each
business segment of our financial services platform.





Our
direct costs are comprised of commissions paid to associates and miscellaneous
fees related directly to the generation of revenue. These costs have a direct
relationship to our revenue and will increase or decrease with changes in
revenue.





Expenses by
Segment





RFIS:





Three
      Months Ended
            
            Nine
      months EndedSeptember
      30,
            %
            September
      30,
            %2008
            2007
            Change
            2008
            2007
            ChangeInsurance
      servicesDirect
      costs
            $58,589
            $         434
            1340%
            $
      113,724
            $
      1,325
            848%Consulting
            838
            73,114
            (99%)
            12,838
            135,853
            (91%)Professional
      fees
            6,000
            14,016
            (57%)
            21,000
            34,016
            (38%)Executive
      compensation
            15,000
            13,519
            11%
            45,000
            37,566
            20%General
      expenses
            63,070
            19,346
            226%
            180,543
            35,230
            413%Depreciation
            165
            121
            36%
            494
            363
            36%Operating
      expenses
            $
      143,662
            $
      120,550
            19%
            $373,599
            $244,354
            53%





16





RFIS
experienced an overall increase in operating expenses due to full commencement
of operations. RFIS was acquired on February 1, 2007 with one month of historic
operations. To meet the objectives of our business plan, RFIS initially focused
on personal insurance lines including home, auto and life. RFIS now expanded
focus to included full commercial lines in its product mix. Through the addition
of commercial products, RFIS’s gross commission income is anticipated to
increase substantially. With the increased commission revenue, RFIS’s commission
expense included in its direct costs has also increased. On average, RFIS will
pay a 65% commission to its agents on each commercial policy written verses
approximately 5% on personal lines. During the current year, RFIS acquired a
customer list for the commercial trucking industry. This was the primary
increase in direct costs for the three-months ended September 30, 2008. RFIS’s
nine-month increase of 848% is attributable to increases in all policies
written.





During
the 2007 fiscal period ended September 30, 2008, RFIS employed six full-time
agents and two full-time administrative staff. Base salaries are included in the
general expenses and although RFIS has experienced an approximate 226% increase
in the three-month period, it has been able to reduce external consulting fees
and professional fees by 99% and 57%, respectively. In addition, during the
nine-month period RFIS had reductions in these expenses of 91% and 38%,
respectively.





RREM:





Three
      Months Ended
            May
      2, 2007 to
            
            Nine
      months Ended
            May
      2, 2007 toSeptember
      30,
            September
      30,
            %
            September
      30,
            September
      30,
            %2008
            2007
            Change
            2008
            2007
            ChangeMortgage
      servicesDirect
      costs
            $      29,823
            $        4,446
            570%
            $        80,247
            $         4,446
            1705%Consulting
            2,000
            2,350
            (15%)
            3,710
            2,350
            58%Professional
      fees
            3,000
            5,700
            (47%)
            9,000
            21,305
            (58%)Executive
      compensation
            1,107
            30,000
            (96%)
            59,318
            46,000
            29%General
      expenses
            34,960
            71,313
            (51%)
            174,972
            97,861
            79%Depreciation
            241
            183
            32%
            693
            183
            278%Operating
      expenses
            $      71,131
            $      113,992
            (38%)
            $      327,940
            $      172,145
            91%





These comparative results are not a
clear representation of actual change. We acquired RREM in May of 2007 and
therefore have only included the activity since May 2, 2007, the date of
acquisition. Further, RREM had not fully commenced operations as of September
30, 2007. RREM’s resources were allocated towards the development of mortgage
leads and business structure. This resulted in non-recurring professional
expenses represented by a decrease of 47% during the three-month period in 2008
over the same period in 2007. We expect outside professional fees to remain
fairly consistent for the remainder of the year.





17


RREM
recorded direct costs primarily comprised of commissions paid to agents and
brokers, loan fees and miscellaneous costs directly attributed to the revenue
earned. RREM had a 570% increase in the three months and a 1705% increase in the
nine-months ended September 30, 2008 due to the acquisition and operational
commencement dates.





RREM’s
general and administrative expenses have decreased 51% from 2007 for the
three-month period ended September 30, 2008. Overall, RREM has increased its
general and administrative expenses 79%. The increase was anticipated with the
commencement of operations. RREM added both administrative staff as well as
mortgage specialists to expand its operations and capture additional revenue
streams in the volatile real estate market. During the second quarter of fiscal
2008, RREM hired four additional loan specialists for the primary purpose of
developing a revenue stream in loan modifications and short sales. Due to the
declinig real estate markets we have reduced our staff to one until such time
that sufficient revenue leads can be developed. Approximately 60% of RREM’s
general and administrative expenses in the three and nine-month periods are
attributable to salaries and wages.





Executive
compensation is comprised of cash compensation paid to real estate and mortgage
executives. In March of 2008, the President of RREM resigned, eliminating
further obligation for his compensation. Though RREM anticipates continued
executive compensation, it intends to re-structure the compensation package by
lowering the base salary and focusing more of the compensation on net revenue
generated.





GBI:





On June 2, 2008, we consummated our
staged acquisition of GBI, which began with the purchase of a 15% interest in
September 2007 and an additional 6% in March of this year. We have included the
revenue and expenses of GBI from the date of acquisition through September 30,
2008 in our unaudited condensed consolidated financial statements. We expect the
amounts recognized in the period ended September 30, 2008 to be indicative of
future operating expenses.





The
amounts consolidated from the activities of GBI are as follows:





Acquisition
      toSeptember
      30, 2008Brokerage
      servicesDirect
      costs
            $       1,857,273Consulting
            59,852Professional
      fees
            55,765Executive
      compensation
            854,935General
      expenses
            410,090Depreciation
            8,709Operating
      expenses
            $3,236,624








18


Other
income and (expense)





Three
      Months Ended
            
            Nine
      months EndedSeptember
      30,
            %
            September
      30,
            %2008
            2007
            Change
            2008
            2007
            ChangeConsolidatedInterest
      income
            $9,981
            $14,438
            (31%)
            $38,716
            $51,057
            (24%)Interest
      (expense)
            (6,686)
            (5,587)
            20%
            (17,747)
            (16,921)
            5%Other
      income
            1,714
            -
            -
            44,555
            -
            -Minority
      interest
            -
            -
            -
            (40,160)
            -
            -Dividend
      income
            121,200
            -
            -
            121,200
            -
            -





Other income and expense consists of
interest earned and expenses, rental income from sub-lease of facilities and our
minority interest investments. We experienced a 31% and 24% decline in interest
income as a direct result of our depletion of cash resources held in interest
bearing money market accounts. 64% of our interest expense is attributable to
our related party note payable to the founder of DAC. The remaining interest was
incurred during ordinary course of business through the use of corporate credit
cards. We expect this amount to remain unchanged throughout the remainder of the
fiscal year.





We have recorded $44,555 in other
income primarily arising from our consolidation of GBI. Historically, GBI has
sub-leased its excess office space. With the completion of the acquisition, our
intention is to fully utilize all space available and therefore do not expect
future income from this source.





We currently own a 24.9% interest in
Maximum and record the minority interest gains and losses as prescribed by SFAS
115. Historically, included in our minority interest was a 24.9% interest in AIS
and our previous minority interest in GBI. During the second fiscal quarter we
sold our interest in AIS and completed our acquisition of GBI. In October 2008,
Maximum ceased business operations due to the current economical issues. In
October we wrote off our entire investment in Maximum.





Satisfaction
of our cash obligations for the next 12 months.





Historically,
our plan of operation has been stalled by a lack of adequate working
capital.  During the first quarter of 2008, we raised $170,000 through
a private placement and as of September 30, 2008 we had available cash of
$474,218. Subsequent to the quarter end, we raised $125,000 through an
additional private placement of shares of our preferred stock. We believe these
funds will help support existing operational costs, but will only be sufficient
to satisfy our working capital requirements through December 31, 2008.
Consequently, in addition to cash generated from operations, we will need to
raise additional funds through either equity, including convertible securities
such as preferred stock or debentures, or debt financing.





19


Summary
of any product research and development that we will perform for the term of our
plan of operation.





We do not
anticipate performing any additional significant product research and
development under our plan of operation with Dial-A-Cup, RFIS, RREM, GBI or in
the financial services industry.





Expected
purchase or sale of plant and significant equipment.





We do not
anticipate the purchase or sale of any plant or significant equipment; as such
items are not required by us at this time.





Significant
changes in the number of employees.





Currently
we have full-time employment agreements in place with two of our executive
officers; Joseph Mangiapane, Jr. (CEO) and Thomas Jandt (EVP of Business
Development). The parent company has a total of 4 full time employees including
the officers listed above.





In
conjunction with the RFIS merger, RFIS entered into an employment agreement with
Todd Torneo, to serve as its President.  Currently, RFIS has 6 full
time agents and 2 administrative people.





During
the year ended December 31, 2007, we entered into a consulting agreement with
Kathleen McPherson whereby she agreed to provide consulting services in the area
of corporate structure, marketing, strategic alliances, and other matters
relating to our management and growth.  The consulting agreement
expired on August 30, 2008.





We intend
to use the services of independent consultants and contractors to perform
various professional services when appropriate. We believe the use of
third-party service providers may enhance our ability to contain general and
administrative expenses.





Liquidity
and Capital Resources





A
critical component of our operating plan impacting our continued existence is
the ability to obtain additional capital through additional equity and/or debt
financing. We do not anticipate generating sufficient positive internal
operating cash flow until such time as we can generate substantial additional
revenues, which may take the next few years to fully realize. In the event we
cannot obtain the necessary capital to pursue our strategic plan, we may have to
cease or significantly curtail our operations. This would materially impact our
ability to continue operations.





20


The
following table summarizes our current assets, liabilities and working capital
at September 30, 2008 compared to December 31, 2007.





September
      30,
              2008
            December
      31, 2007
            Increase
      / (Decrease)$
            %Current
      Assets
            $       4,175,601
            $        5,823,945
            $(1,648,344)
            (28%)Current
      Liabilities
            1,747,800
            457,268
            1,290,532
            282%Working
      Capital
            $       2,427,801
            $        5,366,677
            $(2,938,876)
            (55%)





Prior to
the private placements at the end of 2006 and during fiscal 2007, the inventor
of DAC’s product primarily funded our operations. As of September 30, 2008,
total amounts owed in principal and interest to this individual was $225,693.
The proceeds loaned have been used to fund operations and for the development of
a prototype of our beverage dispenser. The note bears interest at 10% per annum
and is due on demand.  For the nine months ended September 30, 2008,
we recorded $11,290 of interest expense related to the note. As we expand our
activities, we may continue to experience net negative cash flows from
operations, pending receipt of additional revenues.





During fiscal 2007 we completed a
private placement for $2 million and during the nine months ended September 30,
2008 we raised an additional $170,000. In addition, subsequent to the quarter
end, we raised $125,000 through an additional private placement of shares of our
preferred stock. We believe the $474,218 in cash on hand at September 30, 2008
and the funds from the preferred private placement will only be sufficient to
sustain operations through fiscal 2008. As a result, we will need to seek
additional funding for operations through equity or convertible securities
offerings and may be required to do so in the future through additional
financing, acquisitions, joint ventures or other means available to
us.  There can be no assurance that we will be able to complete a
transaction or complete a transaction on terms favorable to our shareholders or
us.





As we
continue to expand in the financial services industry, we anticipate incurring
operating losses over the next twelve months. Our continued losses from
operations makes predictions of future operating results difficult to ascertain.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development.





Off-Balance
Sheet Arrangements





We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results or operations, liquidity, capital expenditures or capital
resources that is material to investors.





21


Critical
Accounting Policies and Estimates





Revenue Recognition: We
recognize revenue from product sales once all of the following criteria for
revenue recognition have been met: pervasive evidence that an agreement exists;
the services have been rendered; the fee is fixed and determinable and not
subject to refund or adjustment; and collection of the amount due is reasonably
assured.  We will primarily derive our revenues from anticipated
financial service related fees, such as commissions.





RFIS
currently earns commissions paid by insurance companies which are based on a
percentage of the premium charged to the policyholder and considered earned over
the term of the policy. Deferred commissions are related to the unexpired terms
of the policies in force. The Company recognizes revenue net of expected
cancellations in accordance with Staff Accounting Bulletin (“SAB”)
13A.





Concentration of credit risk for
cash deposits:Financial instruments that potentially subject
the Company to credit risk consist principally of cash deposits. Accounts at
each institution are insured by the Federal Deposit Insurance Corporation (FDIC)
up to $250,000. At September 30, 2008, we had approximately $7,363 in excess of
FDIC insured limits.





Recent
Accounting Developments





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS
No. 159 allows the company to choose to measure many financial assets and
financial liabilities at fair value. Unrealized gains and losses on items for
which the fair value option has been elected are reported in earnings. SFAS 159
is effective for fiscal years beginning after November 15, 2007. The adoption of
SFAS 159 is not expected to have a material impact on the Company’s financial
position, results of operation or cash flows.





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”. This statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling (minority) interest
in a subsidiary and for the de-consolidation of a subsidiary. It clarifies that
a non-controlling interest in a subsidiary is equity in the consolidated
financial statements. SFAS No. 160 is effective for fiscal years and interim
periods beginning after December 15, 2008. The adoption of SFAS 160 is not
expected to have a material impact on the Company’s financial position, results
of operation or cash flows.





Item
3.Quantitative
and Qualitative Disclosures about Market Risk.





Not
applicable.


22




Item
4T. Controls and Procedures.







Our Chief
Executive Officer, Joseph Mangiapane, Jr., and former Principal Financial
Officer, Terence Davis, evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934, as amended) as of the end of the period covered by this
Report.  Based on the evaluation, Messrs. Mangiapane and Davis
concluded that our disclosure controls and procedures are effective in timely
altering them to material information relating to us (including our consolidated
subsidiaries) required to be included in our periodic SEC filings.





There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





PART
II--OTHER INFORMATION





Item
1.  Legal Proceedings.





From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are not presently a party
to any material litigation, nor to the knowledge of management is any litigation
threatened against us, which may materially affect us.




Item
1A. Risk Factors.







Risks Relating To Our
Business and Marketplace





We
will need additional capital in the future to finance our operations, which we
may not be able to raise or it may only be available on terms unfavorable to us
and or our shareholders. This may result in our inability to fund our working
capital requirements and harm our operational results.





We have and expect to continue to have
substantial capital expenditure and working capital needs. We believe that
current cash on hand and the other sources of liquidity may not be sufficient
enough to fund our operations beyond fiscal 2008. Therefore, we will need to
raise additional funds to continue our operations. Furthermore, additional funds
will be needed to pursue our intentions of acquiring private companies in the
financial services industry.





Additional financing might not be
available on terms favorable to us, or at all. If adequate funds were not
available or were not available on acceptable terms, our ability to fund our
operations, take advantage of unanticipated opportunities, develop or enhance
our business or otherwise respond to competitive pressures would be
significantly limited.


23


An
inability to access capital readily or on terms favorable to us could impair our
ability to fund operations and could jeopardize our financial
condition.





Access to funds is essential to our
anticipated business of financial services. In the future we may need to incur
debt or issue equity in order to fund our working capital requirements, as well
as to make acquisitions and other investments. Our access to funding sources
could be hindered by many factors. Those factors that are specific to our
anticipated line of business include the possibility that lenders could develop
a negative perception of our long-term or short-term financial prospects if we
incur large trading losses or legal liabilities or if the level of our business
activity decreases due to a market downturn. Similarly, our access may be
impaired if regulatory authorities take significant action against us, or if our
employees engage in material unauthorized or illegal activity.





The
U.S. credit markets have been dealing with the effects of numerous defaults by
homeowners on “subprime” mortgage loans, which may materially impact our real
estate and mortgage subsidiary.





“Subprime” mortgage loan defaults could
adversely impact the operations of our real estate and mortgage
division.  In addition, subprime mortgage loan defaults began to
increase with respect to mortgages considered to be less credit risk than
“subprime” mortgages.  It is expected that mortgage default rates will
continue to increase through fiscal 2008. These defaults have not only had a
materially adverse impact on the spending power of the borrowers of such
defaulted mortgage loans, but have also reduced the ability of buyers of
residential properties to acquire single family residences, in addition to
reductions in the value of investment portfolios containing securities affected
by such mortgages.  Because the real estate and mortgage division is
highly dependent upon fees and commissions based upon sales and financings
related to residential and investment properties, the downward trend in
“subprime” mortgages may materially impact our results of operations on a
consolidated basis.





We
have limited operating history in the financial services industry and there can
be no assurance that we will be successful in this industry.





Our proposed operations are subject to
all of the risks inherent in the establishment of a new business, including
licensing risks, insufficient capital, unforeseen problems, and expenses and
complications encountered with the early phases of operations in a business.
Moreover, our lack of an operating history in the financial services industry
makes it impossible to predict whether or not we will operate profitably in the
industry. While we have brought on management that is familiar with this
industry, there can be no assurances that we will be able to locate, hire and
retain the necessary personnel to initiate, manage and operate this new line of
business, develop and implement necessary systems, obtain contracts and obtain
financing as contemplated in our business strategy.





24


We
may not complete all of our proposed acquisitions, and even if we do, these
acquired companies have not operated as a combined entity and are not fully
integrated, and we may not be able to integrate them successfully.





During
the first six months of 2007, we completed two mergers with RFIS and
RREM.  At the end of the second quarter of 2008 we completed the
merger with GBI.  We have also entered into additional non-binding
letters of intent to acquire more businesses involved in the financial services
industry.  Each acquisition is subject to customary closing
conditions; including the completion of due diligence reasonably satisfactory to
us, the negotiation and execution of a definitive agreement, required regulatory
approvals, and the acquired company providing audited financial statements as
required by SEC rules and regulations.  We may not be able to complete
all of these acquisitions if we are not satisfied with our due diligence
investigation, if we are unable to negotiate definitive agreements, if we cannot
obtain the required regulatory approvals, or if the companies to be acquired
cannot provide the required audited financial statements.





Further,
even if we are able to successfully complete all of these proposed acquisitions,
the companies to be acquired have been operated as separate independent entities
to date, and we may not be able to integrate the operations of these businesses
successfully or institute the necessary systems and procedures, including
accounting and financial reporting systems, to manage the combined enterprise on
a profitable basis. Our management group has only recently been assembled and
may not be able to manage the combined entity effectively or to successfully
implement our operating strategies.  Any inability to integrate
acquired companies successfully would have a material adverse effect on our
business, financial condition and results of operations.





We
may not be able to retain our key personnel or hire the personnel we need to
sustain and grow our business.





We face
intense competition for qualified employees from businesses in the financial
services industry.  Our performance is highly dependent upon our
ability to attract, retain, and motivate highly skilled, talented
employees.  These professionals are regularly recruited by other firms
and may choose to change firms, in which case their clients may choose to move
their assets.  Given our relatively small size compared to some of our
anticipated competitors, the performance of our business may be more adversely
affected than our competitors would be if we lose well-performing employees and
are unable to attract new ones.





Regulatory
capital requirements and our holding company structure may adversely affect our
ability to expand or maintain present levels of our business or impair our
ability to meet our financial obligations.





25


GBI is
subject to the SEC’s uniform net capital rule, Rule 15c3-1, which sets the
minimum level of net capital a broker-dealer must maintain and also requires
that a portion of its assets be relatively liquid.  As we are a
holding company, we will depend on dividends and other payments from our
subsidiaries to fund all payments on our obligations, including any debt
obligations, and potential working capital requirements.  These
regulatory restrictions may impede our access to funds.  In addition,
underwriting commitments require a charge against net capital and, accordingly,
GBI’s ability to make underwriting commitments may be limited by the requirement
that it must at all times be in compliance with the applicable net capital
regulations.  GBI is also subject to certain notification requirements
related to withdrawals of excess net capital.





We
are subject to strict government regulations and the failure to comply could
result in disciplinary actions.





The
securities industry in the United States is subject to extensive regulations
under both Federal and State laws.  Broker-dealers, such as GBI, and
investment advisors are subject to regulations covering all aspects of their
business.  Recently, the securities industry has experienced a great
deal of negative exposure due to alleged underwriting negligence, conflicts of
interest, research improprieties and mutual fund trading
improprieties.  As a result, regulatory agencies and the U.S.
government have intervened in an attempt to resolve these various
issues.  In addition, the SEC, FINRA, other self-regulatory
organizations, and state securities commissions can censure, fine, issue
cease-and-desist orders, or suspend or expel a broker-dealer or any of its
officers or employees.





Our
ability to comply with all applicable laws and rules is largely dependent on our
establishment and maintenance of a system to ensure compliance with these laws
and rules, as well as our ability to attract and retain qualified compliance
personnel.  The demands placed upon our personnel and financial
resources may be too significant for us to quickly adapt to a changing
regulatory environment and may impact our ability to provide or expand our
services.  Any disciplinary or other action imposed upon us due to
claimed noncompliance in the future could have a material adverse effect on our
business, financial condition and operating results.





In
addition, our operations and profitability may be affected by additional
legislation, changes in rules promulgated by the SEC, FINRA, other
self-regulatory organizations, and state securities commissions, or changes in
the interpretation or enforcement of existing laws and rules including, but not
limited to, existing regulations which restrict communications between our
research analysts and our other departments.  We cannot assure you
that such future regulations will not require us to implement additional
compliance policies and that such policies will not materially increase our
compliance expenses or otherwise adversely affect our business, financial
condition and operating results.





26


We
engage in the securities business that subjects us to the specific risks of that
business.





The
securities business is by its nature subject to various risks, particularly in
volatile or illiquid markets, including the risk of losses resulting from the
underwriting or ownership of securities, customer fraud, employee errors and
misconduct, failures in connection with the execution of securities
transactions, and litigation.  Our business and profitability are
affected by many other factors, including:





•
            Volume,
      size and timing of securities
transactions;


•
            Demand
      for investment banking services;


•
            Level
      and volatility of interest rates;


•
            Availability
      of credit;


•
            Volatility
      of equity and debt securities held in
inventory;


•
            Legislation
      affecting the business and financial communities;
  and


•
            The
      economy in general.





Conditions in the financial markets and
the economy generally have a direct and material impact on our results of
operations and financial condition.  For example, our investment
banking revenue, in the form of underwriting discounts, placement agent fees,
and financial advisory fees, is directly related to the volume and value of the
transactions in which we are involved.  When uncertain or unfavorable
market or economic conditions exist, the volume and size of capital-raising
transactions and acquisitions and dispositions typically decrease, thereby
reducing the demand for our investment banking services and increasing price
competition.





A
downturn in the financial markets may also result in a decline in the volume and
value of trading transactions.  This could lead to a decline in the
revenue we receive from commissions on the execution of trading transactions and
a reduction in the value of our trading positions, commissions and
spreads.  Sudden sharp declines in market values of securities can
result in illiquid markets, making it more difficult to resell securities we own
and decreasing our trading activities generally, and the failure of
counterparties to perform their obligations, as well as increases in claims and
litigation, including arbitration claims from clients.





We
may not be able to compete successfully with other companies in the securities
industry.





The
securities industry is extremely competitive and our overall business will be
adversely affected if we are unable to compete successfully. In recent years,
significant price competition in many areas of our business, including pressure
on trading spreads and commissions have reduced financial service firms’ profit
margins.  We believe that price competition in these and other areas
will continue as some of our competitors seek to obtain market share by reducing
fees, commissions, or spreads.  Many of these companies are larger
than we are, have greater financial resources and may be more willing to lend
money to businesses in connection with providing them with financial advisory
services.  In our proposed capital markets and investment banking
businesses, we would compete against larger national and international firms
with much larger capital bases that allow them to underwrite larger offerings
and hold much larger trading positions.


27


Further,
consolidation in the securities industry fostered in part by changes in the
regulatory framework in the U.S. has also increased competition, bolstering the
capital base, product diversification, and geographic reach of some of our
competitors.  Finally, the emergence of alternative securities and
futures trading systems via the internet and other media has offered a
potentially less expensive alternative to our services.  If this trend
toward using alternative trading systems continues to grow, it may adversely
affect our commission and trading revenue, reduce our participation in the
trading markets and our ability to access market information, and result in the
creation of new and stronger competitors.





Risks Relating To Our Common
Stock





Because
our common stock is deemed a low-priced “Penny” stock, an investment in our
common stock should be considered high risk and subject to marketability
restrictions.





Since our
common stock is a penny stock, as defined in Rule 3a51-1 under the Securities
Exchange Act, it will be more difficult for investors to liquidate their
investment even if and when a market develops for the common stock. Until the
trading price of the common stock rises above $5.00 per share, if ever, trading
in the common stock is subject to the penny stock rules of the Securities
Exchange Act specified in rules 15g-1 through 15g-10. Those rules require
broker-dealers, before effecting transactions in any penny stock,
to:





·
            Deliver
      to the customer, and obtain a written receipt for, a disclosure
      document;


·
            Disclose
      certain price information about the
stock;


·
            Disclose
      the amount of compensation received by the broker-dealer or any associated
      person of the broker-dealer;


·
            Send
      monthly statements to customers with market and price information about
      the penny stock; and


·
            In
      some circumstances, approve the purchaser’s account under certain
      standards and deliver written statements to the customer with information
      specified in the rules.





Consequently, the penny stock rules may
restrict the ability or willingness of broker-dealers to sell the common stock
and may affect the ability of holders to sell their common stock in the
secondary market and the price at which such holders can sell any such
securities.These additional
procedures could also limit our ability to raise additional capital in the
future.





If
we fail to remain current on our reporting requirements, we could be removed
from the OTC Bulletin Board, which would limit the ability of broker-dealers to
sell our securities and the ability of shareholders to sell their securities in
the secondary market.





28


Companies
trading on the OTC Bulletin Board, such as us, must be reporting issuers under
Section 12 of the Securities Exchange Act of 1934, as amended, and must be
current in their reports under Section 13, in order to maintain price quotation
privileges on the OTC Bulletin Board.  More specifically, FINRA has enacted
Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin
Board by requiring an issuer to be current in its filings with the
Commission.  Pursuant to Rule 6530(e), if we file our reports late with the
Commission three times in a two-year period or our securities are removed from
the OTC Bulletin Board for failure to timely file twice in a two-year period
then we will be ineligible for quotation on the OTC Bulletin
Board.  As a result, the market liquidity for our securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of shareholders to sell their securities in the
secondary market.  We have not been late in any of our SEC reports,
subject to Rule 6530, through September 30, 2008.





We
have the ability to issue additional shares of our common stock and shares of
preferred stock without asking for stockholder approval, which could cause your
investment to be diluted.





Our
Certificate of Incorporation authorizes the Board of Directors to issue up to
50,000,000 shares of common stock and on July 31, 2007 we received shareholder
approval of an amendment to our Certificate of Incorporation to allow for
10,000,000 shares of preferred stock.  In addition, in October of 2008
we designated 1,000,000 shares of Series A Convertible Preferred Stock. The
power of the Board of Directors to issue shares of common stock, preferred stock
or warrants or options to purchase shares of common stock or preferred stock is
generally not subject to shareholder approval.  Accordingly, any
additional issuance of our common stock, or preferred stock that may be
convertible into common stock, may have the effect of diluting one’s
investment.





By
issuing preferred stock, we may be able to delay, defer or prevent a change of
control.





Our board
of directors and shareholders have approved an amendment to our Certificate of
Incorporation to provide for “blank check preferred”, which will permit us to
issue, without approval from our shareholders, a total of 10,000,000 shares of
preferred stock.  Our Board of Directors recently set the rights and
preferences for 1,000,000 shares of Series A Convertible Preferred Stock and can
determine the rights, preferences, privileges and restrictions granted to, or
imposed upon, the additional authorized shares of preferred stock and to fix the
number of shares constituting any series and the designation of such
series.  It is possible that our Board of Directors, in determining
the rights, preferences and privileges to be granted when the preferred stock is
issued, may include provisions that have the effect of delaying, deferring or
preventing a change in control, discouraging bids for our common stock at a
premium over the market price, or that adversely affect the market price of and
the voting and other rights of the holders of our common stock.





29


FINRA
sales practice requirements may also limit a stockholder's ability to buy and
sell our stock.





In addition to the “penny stock” rules
described above, FINRA has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.





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





On June
3, 2008, we entered into an agreement for the cancellation of 100,000 shares
previously issued as partial consideration for the purchase of 24.9% of the
total outstanding shares of AIS pursuant to the Share Repurchase and Settlement
Agreement with AIS and Marc Riviello. As of the date of this report the 100,000
shares have been cancelled.





Sales Subsequent to Quarter
End





In
October of 2008, we completed the first closing under a private placement by
selling 62,500 shares of Series A Convertible Preferred Stock for $125,000 in
cash. We paid $10,000 in commissions to Grant Bettingen, Inc., acting as
placement agent for the sale of the preferred shares. We believe the sale of the
shares was exempt from the registration and prospectus delivery requirement of
the Securities Act of 1933, as amended, by virtue of Section 4(2). The shares
were sold directly by us and did not involve a public offering or general
solicitation. The recipients of the shares were afforded an opportunity for
effective access to our files and records that contained the relevant
information needed to make their investment decision, including our financial
statements and 34 Act reports. We reasonably believed that the recipients had
such knowledge and experience in its financial and business matters that they
were capable of evaluating the merits and risks of their
investment.





The rights, preferences, restrictions
and other matters relating to the Series A Convertible Preferred Stock are as
follows:




8% Series
A Convertible Preferred Stock:




The
number of shares constituting the 8% Series A Convertible Preferred Stock shall
be 1,000,000. Such number of shares may be increased or decreased by resolution
of the Board; provided,
that no decrease shall reduce the number of shares of 8% Series A Convertible
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Company convertible into 8% Series A Convertible Preferred
Stock.


30





Section
1.        DESIGNATION.  The
Shares are designated as the Company’s 8% Series A Convertible Preferred Stock
(the “Shares”).





Section
2.        DIVIDEND PROVISIONS.
The holders of the Shares will be entitled to a preferred dividend at the rate
of 8% per annum.  Dividends on the Shares will be cumulative and shall
be paid, solely at the option and discretion of the Company, either (i) in cash,
or (ii) in shares of the Company’s Common Stock at a price equal to $0.50 per
share (4 shares of Common Stock for each Preferred Share).  Dividends
shall be paid semi-annually.





Section
3.        REDEMPTION.





(a)           This
Company may at any time following the first anniversary from the date of
issuance (the “Redemption
Date”), at the option of the Board, redeem in whole or in part the Shares
by paying in cash in exchange for the Shares to be redeemed a sum equal to the
Original Series A Issue Price (as adjusted for any stock dividends, combinations
or splits with respect to such Shares) plus all declared or accumulated but
unpaid dividends on such Shares (the “Redemption Price”). Any
redemption affected pursuant to this provision shall be made on a pro rata basis
among the holders of the Shares in proportion to the number of Shares then held
by them.





(b)           Subject
to the rights of series of preferred stock which may from time to time come into
existence, at least ten (10) but no more than sixty (60) days prior to each
Redemption Date, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Shares to be redeemed, at the
address last shown on the records of this Company for such holder, notifying
such holder of the redemption to be effected, specifying the number of shares to
be redeemed from such holder, the Redemption Date, the Redemption Price, the
place at which payment may be obtained and calling upon such holder to surrender
to this Company, in the manner and at the place designated, his, her or its
certificate or certificates representing the Shares to be redeemed (the “Redemption Notice”). Except
as provided in subsection (4)(c) on or after the Redemption Date, each holder of
Shares to be redeemed shall surrender to this Company the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the Shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed Shares.


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(c)           From
and after the Redemption Date, unless there shall have been a default in payment
of the Redemption Price, all rights of the holders of shares of Shares
designated for redemption in the Redemption Notice as holders of Shares (except
the right to receive the Redemption Price without interest upon surrender of
their certificate or certificates) shall cease with respect to such Shares, and
such Shares shall not thereafter be transferred on the books of this Company or
be deemed to be outstanding for any purpose whatsoever. Subject to the rights of
series of preferred stock which may from time to time come into existence, if
the funds of the Company legally available for redemption of Shares on any
Redemption Date are insufficient to redeem the total number of Shares to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of such Shares ratably among the holders of
such Shares to be redeemed based upon their holdings of Shares. The Shares not
redeemed shall remain outstanding and entitled to all the rights and preferences
provided herein. Subject to the rights of series of preferred stock which may
from time to time come into existence, at any time thereafter when additional
funds of the Company are legally available for the redemption of shares of
Shares, such funds will immediately be used to redeem the balance of the Shares
which the Company has become obliged to redeem on any Redemption Date but which
it has not redeemed.





Section
4.        CONVERSION. The
holders of the Shares shall have conversion rights as follows (the “Conversion
Rights”):





(a)           Right to Convert.
Each Share shall be convertible into shares of the Company’s Common Stock at a
price per share of $0.50 (the “Conversion Price”) (i.e.
every 1 Share converts to 4 shares of Common Stock), at the option of the holder
thereof, at any time following the date of issuance of such Share and on or
prior to the fifth (5th) day
prior to the Redemption Date, if any, as may have been fixed in any Redemption
Notice with respect to the Shares, at the office of this Company or any transfer
agent for such stock.





(b)           Automatic Conversion.
Each Share shall automatically be converted into shares of Common Stock on the
first day of the thirty-sixth (36th) month
following the original issue date of the Shares, at the Conversion Price per
share.





(c)           Mechanics of
Conversion. Before any holder of Shares shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this Company or of any
transfer agent for the Shares, and shall give written notice to this Company at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. This Company shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Shares, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Shares to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date.


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(d)           No Impairment. This
Company will not, by amendment of its Certificate of incorporation or through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by this Company, but will at all times in good faith
assist in the carrying out of all the provisions of this section and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Shares against
impairment.





(e)           Reservation of Stock
Issuable Upon Conversion. This Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the shares of the Shares, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Shares; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Shares, in addition to such other remedies as shall be available to the holder
of such Shares, this Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to the Company’s
Certificate of incorporation.





(f)           Notice. Any notice
required by the provisions of this section to be given to the holders of Shares
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
this Company.





Section
5.        LIQUIDATION
PREFERENCE.





(a)           In
the event of any liquidation, dissolution or winding up of the Company, either
voluntary or involuntary, subject to the rights of series of preferred stock
that may from time to time come into existence, the holders of Shares shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of this Company to the holders of Common Stock by reason of their
ownership thereof, an amount per share equal to the sum of (i) $2.00 for each
outstanding Share (the “Original Series A Issue
Price”) and (ii) an amount equal to 12% of the Original Series A Issue
Price for each 12 months that has passed since the date of issuance of any
Shares plus any accrued or declared but unpaid dividends on such Share (such
amount (of declared but unpaid dividends) being referred to herein as the “Premium”). If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Shares shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then, subject to the rights
of series of preferred stock that may from time to time come into existence, the
entire assets and funds of the Company legally available for distribution shall
be distributed ratably among the holders of the Shares in proportion to the
preferential amount each such holder is otherwise entitled to
receive.


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(b)           Upon
the completion of the distribution required by subparagraph (a) above and any
other distribution that may be required with respect to series of preferred
stock that may from time to time come into existence, the remaining assets of
the Company available for distribution to stockholders shall be distributed
among the holders of Shares and Common Stock pro rata based on the number of
shares of Common Stock held by each (assuming conversion of all such
Shares).





(i) For
purposes of this provision, a liquidation, dissolution or winding up of this
Company shall be deemed to be occasioned by, or to include, (A) the acquisition
of the Company by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation but, excluding any merger effected exclusively for the purpose
of changing the domicile of the Company); or (B) a sale of all or substantially
all of the assets of the Company; unless the Company’s
shareholders of record as constituted immediately prior to such acquisition or
sale will, immediately after such acquisition or sale (by virtue of securities
issued as consideration for the Company’s acquisition or sale or otherwise) hold
at least 50% of the voting power of the surviving or acquiring
entity.





(ii)           In
any of such events, if the consideration received by the Company is other than
cash, its value will be deemed its fair market value. Any securities shall be
valued as follows:







(A)           Securities
not subject to investment letter or other similar restrictions on free
marketability (covered by (B) below):







(1)           If
traded on a securities exchange (NASDAQ, AMEX, NYSE, etc.), the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the thirty-day period ending three (3) days prior to the
closing;





(2)           If
traded on a quotation system, such as the Over-the-Counter Bulletin Board or
Pink Sheets, the value shall be deemed to be the average of the closing bid or
sale prices (whichever is applicable) over the thirty-day period ending three
(3) days prior to the closing; and





(3)           If
there is no active public market, the value shall be the fair market value
thereof, as mutually determined by the Company and the holders of at least a
majority of the voting power of all then outstanding shares of Preferred
Stock.





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(B)           The
method of valuation of securities subject to investment letter or other
restrictions on free marketability (other than restrictions arising solely by
virtue of a shareholder’s status as an affiliate or former affiliate) shall be
to make an appropriate discount from the market value determined as above in (A)
(1), (2) or (3) to reflect the approximate fair market value thereof, as
mutually determined by the Company and the holders of at least a majority of the
voting power of all then outstanding shares of such Preferred
Stock.





(iii)                      In
the event the requirements of this provision are not complied with, this Company
shall forthwith either:





(A)           cause
such closing to be postponed until such time as the requirements of this
provision have been complied with; or





(B)           cancel
such transaction, in which event the rights, preferences and privileges of the
holders of the Shares shall revert to and be the same as such rights,
preferences and privileges existing immediately prior to the date of the first
notice referred to in subsection 3(c)(iv) hereof.





(iv)                      The
Company shall give each holder of record of Shares written notice of such
impending transaction not later than ten (10) days prior to the shareholders’
meeting called to approve such transaction, or ten (10) days prior to the
closing of such transaction, whichever is earlier, and shall also notify such
holders in writing of the final approval of such transaction. The first of such
notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 3, and the Company shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
Company has given the first notice provided for herein or sooner than ten (10)
days after the Company has given notice of any material changes provided for
herein; provided, however, that such periods may be shortened upon the written
consent of the holders of Shares that are entitled to such notice rights or
similar notice rights and that represent at least a majority of the voting power
of all then outstanding shares of such Shares.





Section
6.        VOTING RIGHTS. The
holder of each Share shall not have any voting rights, except in the case of
voting on a change in the preferences of Shares.





Section
7.        PROTECTIVE
PROVISIONS. So long as any Shares are outstanding, this Company shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of Shares which is entitled, other than solely by law, to
vote with respect to the matter, and which Shares represents at least a majority
of the voting power of the then outstanding Shares:


35





(a)           sell,
convey, or otherwise dispose of or encumber all or substantially all of its
property or business or merge into or consolidate with any other corporation
(other than a wholly-owned subsidiary corporation) or effect any transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of;





(b)           alter
or change the rights, preferences or privileges of the Shares so as to affect
adversely the Shares;





(c)           increase
or decrease (other than by redemption or conversion) the total number of
authorized shares of preferred stock;





(d)           authorize
or issue, or obligate itself to issue, any other equity security, including any
other security convertible into or exercisable for any equity security (i)
having a preference over, or being on a parity with, the Shares with respect to
dividends or upon liquidation, or (ii) having rights similar to any of the
rights of the Preferred Stock; or





(e)           amend
the Company’s Certificate of Incorporation or bylaws.





Issuer
Purchases of Equity Securities





We did not repurchase any of our equity
securities during the quarter ended September 30, 2008.





Item
3. Defaults Upon Senior Securities.





None.





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





We did not submit any matters to a vote
of our security holders during the third quarter of 2008.





Item
5. Other Information.





Effective
November 15, 2008, Terence A. Davis retired to pursue other business interests,
thereby resigning as our president and principal financial officer. Mr. Davis’
retirement was effective immediately. We are not aware of any disagreement Mr.
Davis may have with us on any matter relating to our operations, policies or
practices.





Joseph
Mangiapane, Jr., our chief executive officer, will assume the positions as our
president and interim principal financial and principal accounting
officer.





36


Item
6.  Exhibits.





Incorporated
      by referenceExhibit
            Exhibit
      Description
            Filed
      herewith
            Form
            Period
      ending
            Exhibit
            Filing
      date3.1(i)(a)
            ISSG,
      Inc. Articles of Incorporation
            
            10-KSB
            12/31/05
            3.1(i)(a)
            04/05/063.1(i)(b)
            ISSG,
      Inc. Certificate of Correction of Articles of
Incorporation
            
            10-KSB
            12/31/05
            3.1(i)(b)
            04/05/063.1(i)(c)
            ISSG,
      Inc. Amendment to Articles of Incorporation
            
            10-KSB
            12/31/05
            3.1(i)(c)
            04/05/063.1(i)(d)
            Amendment
      to Certificate of Incorporation changing name from ISSG, Inc. to Rubicon
      Financial Incorporated
            
            8-K
            
            3.1(i)(d)
            09/08/063.1(i)(g)
            Amendment
      to Certificate of Incorporation authorizing “blank check” Preferred
      Stock
            
            8-K
            
            3.1(i)(g)
            08/01/073.1(ii)
            Bylaws
      as currently in effect
            
            10-KSB
            12/31/05
            3.1(ii)
            04/05/064.1
            Amended
      and Restated Certificate of Designation of 8% Series A Convertible
      Preferred Stock
            X10.1
            Stock
      Cancellation Agreement
            
            8-K
            
            10.8
            08/06/0710.2
            Share
      Purchase Agreement   between Rubicon Financial Incorporated
      and Grant Bettingen, Inc.
            
            8-K
            
            10.9
            09/14/0710.3
            Consulting
      Agreement with Ms. Kathleen McPherson
            
            8-K
            
            10.10
            09/14/0710.4
            Amendment
      No. 1 to GBI Stock Purchase Agreement dated March 18, 2008
            
            8-K
            
            10.12
            03/21/0810.5
            Employment
      Agreement between GBI and Grant Bettingen
            
            8-K
            
            10.17
            06/06/0810.6
            Stock
      Purchase and Settlement Agreement with AIS Financial Inc. and Marc
      Riviello dated June 2, 2008
            
            8-K
            
            10.18
            06/06/0831.1
            Certification
      of Joseph Mangiapane, Jr., Chief Executive and Principal Financial
      Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
            X32.1
            Certification
      of Joseph Mangiapane, Jr., Chief Executive and Principal Financial
      Officer, pursuant to Section 906 of the Sarbanes-Oxley Act
            X





37


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.





RUBICON
FINANCIAL INCORPORATED


(Registrant)











By:/s/ Joseph Mangiapane,
Jr.


Joseph
Mangiapane, Jr., Chief Executive Officer


(On
behalf of the Registrant and as Principal Financial


Officer)







Date:
November 19, 2008





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