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 June 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


4695
MacArthur Court, 11th
Floor


Newport
Beach, CA  92660


(949)
798-5541


Fax
(949) 258-5112





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 August 12,
2008, was 12,478,162 shares, which includes 501,389 shares authorized but
unissued and 100,000 shares currently subject to cancellation.











PART
1 – FINANCIAL INFORMATION





Item
1. Financial Statements


Rubicon
      Financial IncorporatedCondensed
      Consolidated Balance SheetsJune
      30,
            
            
            December
      31,2008
            
            
            2007Assets
            
            (Unaudited)
            
            
            (Audited)Current
      assets:Cash
            
            $
            516,489
            
            
            $
            1,892,541Restricted
      cash
            
            
            200,000
            
            
            
            -Marketable
      securities
            
            
            778,000
            
            
            
            956,000Accounts
      receivable
            
            
            310,260
            
            
            
            -Prepaid
      expenses
            
            
            2,309,613
            
            
            
            2,969,412Notes
      receivable
            
            
            100,000
            
            
            
            -Notes
      receivable – related party
            
            
            24,202
            
            
            
            5,192Other
      current assets
            
            
            11,423
            
            
            
            800Total
      current assets
            
            
            4,249,987
            
            
            
            5,823,945Fixed
      assets, net of accumulated depreciation of $107,338 and $14,633,
      respectively
            
            
            148,674
            
            
            
            59,104Other
      assets:Deposits
            
            
            16,554
            
            
            
            -Intangible
      assets – customer lists, net of amortization of $20,653
            
            
            2,457,660
            
            
            
            -Long-term
      investments
            
            
            33,243
            
            
            
            175,000Total
      other assets
            
            
            2,507,457
            
            
            
            175,000Total
      assets
            
            $
            6,906,118
            
            
            $
            6,058,049Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Accounts
      payable
            
            $
            172,455
            
            
            $
            79,775Accrued
      expenses
            
            
            464,130
            
            
            
            23,352Investment
      obligation
            
            
            523,000
            
            
            
            104,000Deferred
      revenue
            
            
            91,194
            
            
            
            35,109Current
      portion of capital lease
            
            
            12,335
            
            
            
            -Accrued
      interest payable – related party
            
            
            62,294
            
            
            
            54,493Notes
      payable – related party
            
            
            160,539
            
            
            
            160,539Total
      current liabilities
            
            
            1,485,947
            
            
            
            457,268Long-term
      capital lease
            
            
            5,125
            
            
            
            -Stockholders’
      equityPreferred
      stock, $0.001 par value, 10,000,000 sharesauthorized,
      no shares issued and outstandingas
      of June 30, 2008 and December 31, 2007, respectively
            
            
            -
            
            
            
            -Common
      stock, $0.001 par value, 50,000,000 sharesauthorized,
      11,976,773 and 10,724,273 shares issued and outstandingas
      of June 30, 2008 and December 31, 2007, respectively
            
            
            11,979
            
            
            
            10,724Common
      stock owed but not issued, 501,389 and 559,790as
      of June 30, 2008 and December 31, 2008, respectively
            
            
            501
            
            
            
            559Additional
      paid in capital
            
            
            17,696,113
            
            
            
            15,077,094Other
      comprehensive (loss)
            
            
            (217,983
            )
            
            
            (359,000
            )Accumulated
      (deficit)
            
            
            (12,075,563
            )
            
            
            (9,128,556
            )Total
      stockholders’ equity
            
            
            5,415,047
            
            
            
            5,600,821Total
      liabilities and stockholders’ equity
            
            $
            6,906,118
            
            
            $
            6,058,089








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 Six Months EndedJune
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Revenue
            
            $
            704,283
            
            
            $
            112,903
            
            
            $
            799,503
            
            
            $
            133,701Expenses:Direct
      costs
            
            
            726,926
            
            
            
            62,274
            
            
            
            740,876
            
            
            
            63,628Consulting
            
            
            65,205
            
            
            
            17,788
            
            
            
            114,915
            
            
            
            90,875Professional
      fees
            
            
            49,656
            
            
            
            74,743
            
            
            
            165,590
            
            
            
            230,743Executive
      compensation
            
            
            1,240,936
            
            
            
            461,965
            
            
            
            1,683,865
            
            
            
            813,493General
      and administrative expenses
            
            
            372,952
            
            
            
            120,793
            
            
            
            707,499
            
            
            
            193,994Impairment
      of goodwill
            
            
            -
            
            
            
            2,111,700
            
            
            
            -
            
            
            
            2,234,200Depreciation
      and amortization
            
            
            32,190
            
            
            
            3,119
            
            
            
            39,020
            
            
            
            6,081Total
      expenses
            
            
            2,496,427
            
            
            
            2,852,382
            
            
            
            3,451,765
            
            
            
            3,633,014Net
      operating (loss)
            
            
            (1,792,144
            )
            
            
            (2,739,479
            )
            
            
            (2,652,262
            )
            
            
            (3,499,313
            )Other
      income (expense):Interest
      expense
            
            
            (1,730
            )
            
            
            (3,227
            )
            
            
            (3,260
            )
            
            
            (3,406
            )Interest
      expense - related party
            
            
            (3,901
            )
            
            
            (2,399
            )
            
            
            (7,801
            )
            
            
            (7,928
            )Interest
      income
            
            
            15,540
            
            
            
            19,257
            
            
            
            28,735
            
            
            
            36,352Interest
      income - related party
            
            
            -
            
            
            
            267
            
            
            
            -
            
            
            
            267Other
      income
            
            
            42,841
            
            
            
            -
            
            
            
            42,841
            
            
            
            -Minority
      interest income (loss)
            
            
            19,763
            
            
            
            -
            
            
            
            (40,160
            )
            
            
            -Total
      other income (expense)
            
            
            72,513
            
            
            
            13,898
            
            
            
            20,355
            
            
            
            25,285Net
      (loss)
            
            
            (1,719,631
            )
            
            
            (2,725,581
            )
            
            
            (2,631,907
            )
            
            
            (3,474,028
            )Other
      comprehensive (loss)
            
            
            -
            
            
            
            -
            
            
            
            (315,000
            )
            
            
            -Total
      comprehensive (loss)
            
            $
            (1,719,631
            )
            
            $
            (2,725,581
            )
            
            $
            (2,946,907
            )
            
            $
            (3,474,028
            )Weighted
      average number of common sharesoutstanding
      - basic and fully diluted
            
            
            10,093,812
            
            
            
            15,091,443
            
            
            
            11,518,151
            
            
            
            13,866,234Net
      (loss) per share - basic and fully diluted
            
            $
            (0.17
            )
            
            $
            (0.18
            )
            
            $
            (0.26
            )
            
            $
            (0.25
            )














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 Six Months EndedJune
      30,2008
            
            2007Cash
      flows from operating activitiesNet
      (loss)
            
            $
            (2,631,907)
            
            $
            (3,474,028)Adjustments
      to reconcile net (loss) tonet
      cash (used) in operating activities:Depreciation
      expense
            
            
            39,020
            
            
            6,081Impairment
      of goodwill
            
            
            -
            
            
            2,234,200Minority
      interest losses
            
            
            40,160Amortization
      of prepaid  share-based compensation
            
            
            698,481Shares
      and options issued for services
            
            
            737,764
            
            
            787,461Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            26,110
            
            
            (29,074)Prepaid
      expenses
            
            
            45,053
            
            
            (182,318)Deposits
            
            
            -
            
            
            (2,400)Employee
      advances
            
            
            (8,452)
            
            
            (24,828)Accrued
      interest receivable
            
            
            (1,130)
            
            
            (425)Accounts
      payable
            
            
            33,820
            
            
            (59,640)Accrued
      expenses
            
            
            64,411
            
            
            (4,102)Investment
      obligation
            
            
            (104,000)
            
            
            -Deferred
      revenue
            
            
            56,085
            
            
            (13,326)Accrued
      interest payable
            
            
            -
            
            
            569Accrued
      interest payable - related party
            
            
            7,801
            
            
            7,801Net
      cash (used) by operating activities
            
            
            (996,784)
            
            
            (754,029)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
            
            
            (63,281)
            
            
            (4,791)Distribution
      of assets – related party
            
            
            89,716
            
            
            -Purchase
      of intangible assets
            
            
            (762,313)
            
            
            -Purchase
      of investments
            
            
            -
            
            
            (175,000)Net
      cash (used) by investing activities
            
            
            (737,878)
            
            
            (216,491)Cash
      flows from financing activitiesCash
      acquired with mergers
            
            
            388,610
            
            
            933,207Donated
      capital
            
            
            -
            
            
            456Proceeds
      from notes payable
            
            
            -
            
            
            795Payments
      on notes payable
            
            
            -
            
            
            (3,699)Payments
      from notes payable - related party
            
            
            -
            
            
            (3,976)Shares
      issued for cash
            
            
            170,000
            
            
            -Net
      cash provided by financing activities
            
            
            558,610
            
            
            926,783Net
      increase (decrease) in cash
            
            
            (1,176,052)
            
            
            (43,737)Cash
      - beginning
            
            
            1,892,541
            
            
            1,901,124Cash
      - ending
            
            $
            716,489
            
            $
            1,857,387Supplemental
      disclosures:Interest
      paid
            
            $
            3,572
            
            $
            2,268Income
      taxes paid
            
            $
            3,750
            
            $
            -Non-cash
      financing activities:Shares
      and options issued for services
            
            $
            737,764
            
            $
            787,461Shares
      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 six months ended June 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.





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 $100,000. At June 30, 2008, Rubicon
had approximately $279,750 in excess of FDIC insured limits.








4








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 – Business Combination Achieved in Stages





On
June 2, 2008, Rubicon completed a merger with GBI, a private brokerage firm
registered with the Financial Industry Regulatory Authority (“FINRA”), by
completing the acquisition of 100% of the outstanding common stock of GBI for a
total purchase price of $3,229,364.  In September of 2007, Rubicon
originally purchased a 15% interest in GBI for cash totaling $360,000. Rubicon
accounted for this investment as “Available for Sale” as required by SFAS 115.
In addition, in March of 2008, Rubicon purchased an additional 6% of GBI’s
outstanding shares prior for a purchase price of $400,000. Rubicon paid $312,500
towards to additional interest leaving a balance owed of $87,500, which was
eliminated by GBI upon closing of the merger.





During
the acquisition phases of GBI, Rubicon’s interest in GBI initially consisted of
15% of the total outstanding shares, which was subsequently increased to 21%
with the purchase of an additional 6% interest. Upon completion of the
continuation in management process with FINRA, Rubicon acquired the remaining
79% of the total outstanding shares in exchange for $789,364 in cash and
1,200,000 shares of Rubicon’s common stock. During the acquisition stages,
Rubicon adjusted accounting treatment of its investment in GBI initially from
“Available for Sale”, to the equity method as required by SFAS 115. As a result,
Rubicon expensed $315,000 of previously unrecognized other comprehensive losses
and recorded minority interest losses in the amount of $43,403, resulting in a
net investment of $2,870,961.





Pursuant
to SFAS 141, Rubicon recognized the identifiable assets acquired and the
liabilities assumed as follows:





At
      June 2,2008ConsiderationCash
            
            $
            789,364Equity
      instruments (1,200,000 common shares of Rubicon1)
            
            
            1,680,000Fair
      value of total consideration transferred
            
            
            2,469,364Fair
      value of Rubicon’s equity interest in GBI prior to
    combination
            
            
            401,597$
            2,870,961Recognized
      amounts of identifiable assets acquired and liabilities
      assumedFinancial
      assets
            
            $
            823,463Property,
      plant and equipment
            
            
            62,517Identifiable
      intangible assets – Customer lists2(SeeNote 4)
            
            
            2,442,313Financial
      liabilities
            
            
            (457,332
            )Total
      identifiable net assets
            
            $
            2,870,9611The fair value of the 1,200,000
      common shares issued as part of the consideration paid for 79% GBI was
      determined on the basis of the closing market price of Rubicon’s common
      shares on the acquisition date.2We have allocated the
      consideration paid in excess of the fair value of assets acquired and
      liabilities assumed towards the identifiable intangible customer
      relationships acquired. The estimated net future cash flows from these
      relationships are estimated to be approximately $3,250,000 annually based
      on the assets under management at the time of
      acquisition.





5


The
amount of GBI’s revenue and expenses included in Rubicon’s consolidated income
statement for the period ended June 30, 2008, and the unaudited revenue and
expenses of the combined entity had the acquisition date been January 1, 2008 or
January 1, 2007 are:





Revenue
            
            
            ExpensesActual
      from June 3, 2008 to June 30, 2008
            
            $
            521,064
            
            
            $
            568,414Supplemental
      pro forma fromJanuary
      1, 2008 to June 30, 2008
            
            $
            2,761,950
            
            
            $
            3,157,343Supplemental
      pro forma fromJanuary
      1, 2007 to June 30, 2007
            
            $
            6,059,650
            
            
            $
            10,154,164





Rubicon
believes the acquisition will enhance its financial services platform by
enhancing its ability to offer a broad range of services.  RCBF
further deems the synergies that exist between investment activities, insurance
requirements and the current real estate environment, may create an opportunity
for cross revenue generation for all of its financial service
platforms.







NOTE
3 – Restricted Cash




As a result of Rubicon’s acquisition of
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
4 – Identifiable Intangible Assets




During the six months ended June 30,
2008 Rubicon consummated the acquisition of 100% of the outstanding common
shares of GBI (see Note 2). 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 June 30, 2008, Rubicon recorded amortization in the amount of $20,653
attributable to its intangible assets.




NOTE
5 - 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 June 30, 2008, Rubicon evaluated the fair value of the
securities and recorded other comprehensive loss in the amount of $222,000 to
adjust the recorded value to the market value at the balance sheet
date.




6


NOTE
6 – 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 June 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 June 30, 2008, the principal balance
owed was $5,000 and accrued interest receivable was $342.





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 June 30, 2008 the principal balance was $100,000 and
Rubicon accrued $500 in interest receivable.





NOTE
7 - 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 six month period ended June 30, 2008
Rubicon recorded minority interest losses totaling $16,757. The adjusted value
of its investment at June 30, 2008 was $33,243.





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 (see Note 2). Prior to the consummation
of the acquisition, Rubicon maintained a 21% minority interest in GBI accounted
for under the equity method. As of the date of acquisition, Rubicon recorded
minority interest losses totaling $43,403.





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





NOTE
8 – Related Party Transactions




Rubicon’s
operations were previously funded by the sole officer of DAC. As of June 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.




7
 The
note bears interest of 10% per annum and is due on demand. During the six months
ended June 30, 2008 and 2007, Rubicon recorded $7,801 and $7,928, respectively
of interest expense related to the note. As of June 30, 2008, Rubicon had
interest payable in the amount of $62,294 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 shall receive annual compensation in the amount of $96,000
commencing on April 1, 2008 and expiring on March 31, 2009.





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 June 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 June 30,
2008.




NOTE
9 – Stockholders’ equity





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





During
the six months ended June 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 six months ended June 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.





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 (see Note 2). 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.





8


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 7). As of June 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.





NOTE
10 – 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%.  As of June 30,
2008, Rubicon recorded executive compensation in the amount of
$699,764.





A
summary of stock options and warrants as of June 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
      06/30/08
            
            
            1,800,000
            
            
            $
            1.66
            
            
            
            100,000
            
            
            $
            3.00Vested
      as of 06/30/08
            
            
            1,500,000
            
            
            $
            1.50
            
            
            
            100,000
            
            
            $
            3.00





NOTE
11 – 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.





9


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
            
            
            Six
      Months EndedJune
      30,
            
            
            June
      302008
            
            
            2007
            
            
            2008
            
            
            2007Net
      RevenueInsurance
      services
            
            $
            74,860
            
            
            $
            112,903
            
            
            $
            144,911
            
            
            $
            133,701Mortgage
      services
            
            
            108,359
            
            
            
            -
            
            
            
            133,528
            
            
            
            -Brokerage
      services(1)
            
            
            521,064
            
            
            
            -
            
            
            
            521,064
            
            
            
            -704,283
            
            
            
            112,903
            
            
            
            799,503
            
            
            
            133,701ExpensesInsurance
      services
            
            
            126,884
            
            
            
            99,615
            
            
            
            233,339
            
            
            
            130,965Mortgage
      services
            
            
            146,512
            
            
            
            307,741
            
            
            
            245,244
            
            
            
            309,741Brokerage
      services(1)
            
            
            799,235
            
            
            
            -
            
            
            
            799,235
            
            
            
            -Corporate
            
            
            1,351,283
            
            
            
            2,431,128
            
            
            
            2,468,592
            
            
            
            3,167,0232,423,914
            
            
            
            2,838,484
            
            
            
            3,746,410
            
            
            
            3,607,729$
            (1,719,631
            )
            
            $
            (2,725,581
            )
            
            $
            (2,946,907
            )
            
            $
            (3,474,028
            )





(1)
            Represents
      the 28 day period from June 2, 2008 (the date of the GBI acquisition
      through June 30, 2008).





NOTE
12 – Commitments





Employment
agreements


On March 27, 2008, Rubicon entered into
an employment agreement with its President, Terence Davis. Pursuant to the
agreement, Mr. Davis shall receive annual compensation in the amount of $96,000
commencing on April 1, 2008 and expiring on March 31, 2009.





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




10
 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 June 30,
2008:





2008
            
            $
            120,5402009
            
            
            190,9862010
            
            
            15,915Total
            
            $
            327,441





Rent expense is included in general and
administrative expense and totaled $64,475 and $26,194 for the six months ended
June 30, 2008 and 2007, respectively.




















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;


·
            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;


·
            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;


·
            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;


·
            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.





12


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 the State of
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.





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,




13
 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.





We
own a 24.9% interest in Maximum Financial Investment Group, Inc. (“Maximum”), a
FINRA licensed broker/dealer that focuses on wholesale and online trading. 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 not been cancelled; however, it is
anticipated that the shares will be cancelled on or before August 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 six months ended June 30, 2008 and the comparable periods ended
June 30, 2007.





Revenue:


Three
      Months Ended
            
            
            
            
            
            Six
      Months EndedJune
      30,
            
            
            %
            
            
            June
      30,
            
            
            %2008
            
            
            2007
            
            
            Change
            
            
            2008
            
            
            2007
            
            
            ChangeConsolidatedRevenue
            
            $
            704,283
            
            
            $
            112,903
            
            
            
            524%
            
            
            $
            799,503
            
            
            $
            133,701
            
            
            
            498%Operating
      expenses
            
            $
            2,496,427
            
            
            $
            2,852,382
            
            
            
            (12%)
            
            
            $
            3,451,765
            
            
            $
            3,633,014
            
            
            
            (5%)Net
      operating (loss)
            
            $
            (1,792,144
            )
            
            $
            (2,739,479
            )
            
            
            (35%)
            
            
            $
            (2,652,262
            )
            
            $
            (3,499,313
            )
            
            
            (24%)





Overall
revenues increased 524% during the second fiscal quarter of 2008 and 498% during
the six months ended June 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 28 day period from June 2, 2008 through June 30, 2008.




14


Revenue by
Segment





Three
      Months Ended
            
            
            
            
            
            Six
      Months EndedJune
      30,
            
            
            %
            
            
            June
      30,
            
            
            %2008
            
            
            2007
            
            
            Change
            
            
            2008
            
            
            2007
            
            
            ChangeRevenueInsurance
      services
            
            $
            74,860
            
            
            $
            112,903
            
            
            
            (34%)
            
            
            $
            144,911
            
            
            $
            133,701
            
            
            
            8%Mortgage
      services
            
            
            108,359
            
            
            
            -
            
            
            
            -
            
            
            
            133,528
            
            
            
            -
            
            
            
            -Brokerage
      services
            
            
            521,064
            
            
            
            -
            
            
            
            -
            
            
            
            521,064
            
            
            
            -
            
            
            
            -Total
      revenue
            
            $
            704,283
            
            
            $
            112,903
            
            
            
            
            
            
            $
            799,503
            
            
            $
            133,701





Insurance Services: RFIS
experienced an expected decline of 34% in revenues from insurance services. RFIS
earned $74,860 during the second quarter compared to $112,903 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 steam 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 six month gross revenue increased slightly
by 8% or $144,911 compared to $133,701 due to renewal revenue and a minor
increase in personal policies during the first quarter of 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 June 30, 2008 we earned $108,359 in commissions compared to
$133,528 for the six month period in 2008. The current economic conditions of
the real estate market have limited RREM’s ability to generate revenue on the
sales of residential real estate. As a means of ensuring stability in a
declining market, RREM has introduced “loan modifications” to its existing
portfolio of services. The fees earned on  loan modification services
represent approximately 33% of RREM’s total revenue for the period. RREM is
continuing to seek additional sources of revenue while also increasing its
marketing area.





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 June 30, 2008. GBI represents
our cornerstone of services and has contributed approximately 74% of our total
revenue in the second fiscal quarter and 65% for the six-month period ended June
30, 2008. Consolidated revenue for the twenty-eight days of June totaled
approximately $521,064. GBI anticipates significant increases in commission
revenue as it enters the third quarter through an aggressive campaign to build
broker base and efforts to seek and add additional brokerage and investment
banking branches.














15











Selling
and Administrative Expenses:





Three
      Months Ended
            
            
            
            
            
            Six
      Months EndedJune
      30,
            
            
            %
            
            
            June
      30,
            
            
            %2008
            
            
            2007
            
            
            Change
            
            
            2008
            
            
            2007
            
            
            ChangeDirect
      costs
            
            $
            726,926
            
            
            $
            62,274
            
            
            
            107%
            
            
            $
            740,876
            
            
            $
            63,628
            
            
            
            106%Consulting
            
            
            65,205
            
            
            
            17,788
            
            
            
            267%
            
            
            
            114,915
            
            
            
            90,875
            
            
            
            26%Professional
      fees
            
            
            49,646
            
            
            
            74,743
            
            
            
            (34%)
            
            
            
            165,590
            
            
            
            230,743
            
            
            
            (28%)Executive
      compensation
            
            
            1,240,936
            
            
            
            461,965
            
            
            
            169%
            
            
            
            1,683,865
            
            
            
            813,493
            
            
            
            107%General
      expenses
            
            
            372,952
            
            
            
            120,793
            
            
            
            216%
            
            
            
            707,499
            
            
            
            193,994
            
            
            
            265%Depreciation
      and amortization
            
            
            32,190
            
            
            
            3,119
            
            
            
            932%
            
            
            
            39,020
            
            
            
            6,081
            
            
            
            542%Operating
      expenses
            
            $
            2,496,427
            
            
            $
            740,682
            
            
            
            237%
            
            
            $
            3,451,765
            
            
            $
            1,398,814
            
            
            
            147%





Operating overhead, excluding
impairments, increased 237% over the previous three month comparable period and
147% for the six month comparable period ended June 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
            
            
            
            
            
            Six
      Months EndedJune
      30,
            
            
            %
            
            
            June
      30,
            
            
            %2008
            
            
            2007
            
            
            Change
            
            
            2008
            
            
            2007
            
            
            ChangeInsurance
      servicesDirect
      costs
            
            $
            41,460
            
            
            $
            293
            
            
            
            1405%
            
            
            $
            55,135
            
            
            $
            891
            
            
            
            609%Consulting
            
            
            9,000
            
            
            
            62,739
            
            
            
            (86%)
            
            
            
            12,000
            
            
            
            62,739
            
            
            
            (81%)Professional
      fees
            
            
            6,000
            
            
            
            13,500
            
            
            
            (56%)
            
            
            
            15,000
            
            
            
            20,000
            
            
            
            (25%)Executive
      compensation
            
            
            15,000
            
            
            
            15,000
            
            
            
            -
            
            
            
            30,000
            
            
            
            27,500
            
            
            
            9%General
      expenses
            
            
            53,462
            
            
            
            7,631
            
            
            
            601%
            
            
            
            117,473
            
            
            
            18,717
            
            
            
            528%Depreciation
            
            
            164
            
            
            
            121
            
            
            
            36%
            
            
            
            329
            
            
            
            242
            
            
            
            36%Operating
      expenses
            
            $
            125,085
            
            
            $
            91,532
            
            
            
            37%
            
            
            $
            229,937
            
            
            $
            130,089
            
            
            
            77%





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 50% commission to its agents on each commercial policy written verses
approximately 5% on personal lines. During the second fiscal quarter, RFIS
acquired a customer list for the commercial trucking industry. This was the
primary increase in direct costs for the three-months ended June 30, 2008.
RFIS’s six-month increase of 609% is attributable to increases in all policies
written.





16


During
the 2007 fiscal period ended June 30, 2008, RFIS employed two full-time agents.
As of June 30, 2008, RFIS had six additional full-time agents and two full-time
administrative staff. Base salaries are included in the general expenses and
although RFIS has experienced an approximate 601% increase in the three-month
period, it has been able to reduce external consulting fees and professional
fees by 86% and 56%, respectively. In addition, during the six-month period RFIS
had reductions of 81% and 25%, respectively.





RREM:





Three
      Months Ended
            
            
            May
      2, 2007 to
            
            
            
            
            
            Six
      Months Ended
            
            
            May
      2, 2007 toJune
      30,
            
            
            June
      30,
            
            
            %
            
            
            June
      30,
            
            
            June
      30,
            
            
            %2008
            
            
            2007
            
            
            Change
            
            
            2008
            
            
            2007
            
            
            ChangeMortgage
      servicesDirect
      costs
            
            $
            50,149
            
            
            $
            -
            
            
            
            -
            
            
            $
            50,424
            
            
            $
            -
            
            
            
            -Consulting
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,710
            
            
            
            -
            
            
            
            -Professional
      fees
            
            
            3,000
            
            
            
            15,605
            
            
            
            (81%)
            
            
            
            6,000
            
            
            
            15,605
            
            
            
            (62%)Executive
      compensation
            
            
            22,893
            
            
            
            16,000
            
            
            
            43%
            
            
            
            58,211
            
            
            
            16,000
            
            
            
            264%General
      expenses
            
            
            72,976
            
            
            
            26,548
            
            
            
            175%
            
            
            
            140,012
            
            
            
            26,548
            
            
            
            427%Depreciation
            
            
            240
            
            
            
            -
            
            
            
            -
            
            
            
            452
            
            
            
            -
            
            
            
            -Operating
      expenses
            
            $
            149,258
            
            
            $
            58,153
            
            
            
            157%
            
            
            $
            256,809
            
            
            $
            58,153
            
            
            
            342%





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 June 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 81% 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.





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 100% increase in both the three and six month periods ended
June 30, 2008 due to the acquisition and operational commencement
dates.





RREM’s
general and administrative expenses have increased from 2007 for the three and
six month periods ended June 30, 2008, respectively. 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. Approximately 60% of RREM’s general and administrative expenses in the
three and six month periods are attributable to salaries and wages.





17


Executive
compensation is comprised of cash compensation paid to real estate and mortgage
executives. The annual compensation was by employment agreement and consisted of
a base salary of $120,000 annually, plus commissions. 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 June 30, 2008
in our unaudited condensed consolidated financial statements. We expect the
amounts recognized in the short period ended June 30, 2008 to be indicative of
future operating expenses.


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





Acquisition
      toJune
      30, 2008Brokerage
      servicesDirect
      costs
            
            $
            404,497Consulting
            
            
            18,705Professional
      fees
            
            
            8,853Executive
      compensation
            
            
            102,669General
      expenses
            
            
            85,202Depreciation
            
            
            2,677Operating
      expenses
            
            $
            622,603








Other
income and (expense)





Three
      Months Ended
            
            
            
            
            
            Six
      Months EndedJune
      30,
            
            
            %
            
            
            June
      30,
            
            
            
            %
            %2008
            
            
            2007
            
            
            Change
            
            
            2008
            
            
            2007
            
            
            ChangeConsolidatedInterest
      income
            
            $
            15,540
            
            
            $
            19,524
            
            
            
            (20%)
            
            
            $
            28,735
            
            
            $
            36,619
            
            
            
            (22%)Interest
      (expense)
            
            
            (5,631
            )
            
            
            (5,626
            )
            
            
            -
            
            
            
            (11,061
            )
            
            
            (11,334
            )
            
            
            -Other
      income
            
            
            42,841
            
            
            
            -
            
            
            
            -
            
            
            
            42,841
            
            
            
            -
            
            
            
            -Minority
      interest
            
            
            19,763
            
            
            
            -
            
            
            
            -
            
            
            
            (40,160
            )
            
            
            -
            
            
            
            -





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 20% and 22% decline in interest
income as a direct result of our depletion of cash resources held in interest
bearing money market accounts. 71% 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.





18


We have recorded $42,841 in other
income 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. The remainder of
the fiscal year will represent only our 24.9% minority interest 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 June 30, 2008 we had available cash of $516,489.
We believe these funds will help support existing operational costs, but will
only be sufficient to satisfy our working capital requirements through September
30, 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.





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 three of our executive
officers; Joseph Mangiapane, Jr. (CEO), Terence Davis (President) and Thomas
Jandt (EVP of Business Development). The parent company has a total of 5 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.





As
a result of the merger with RREM, RREM entered into an employment agreement with
Joel Newman, to serve as its President, which was subsequently terminated upon
the resignation of Mr. Newman in March of 2008.  On March 13, 2008,
RREM entered into an employment agreement with its new president, Craig Triance,
one of our directors, which was terminated during the quarter ended June 30,
2008 concurrent with Mr. Triance’s resignation. RREM has 5 full time personnel
assisting in the mortgage and real estate units of RREM.





19


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
expires on August 30, 2008 or upon a formal employment agreement being executed
with Ms. McPherson.





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.





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


June
      30,
            
            
            December
      31,
            
            
            Increase
      / (Decrease)2008
            
            
            2007
            
            
            $
            
            
            
            %Current
      Assets
            
            $
            4,249,987
            
            
            $
            5,823,945
            
            
            $
            (1,573,958
            )
            
            
            (27%)Current
      Liabilities
            
            
            1,485,947
            
            
            
            457,268
            
            
            
            1,028,679
            
            
            
            225%Working
      Capital
            
            $
            2,764,040
            
            
            $
            5,366,677
            
            
            $
            (2,602,637
            )
            
            
            (49%)





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 June 30, 2008,
total amounts owed in principal and interest to this individual was $214,433.
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 six months ended June 30, 2008, we
recorded $7,801 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 six months ended June 30, 2008
we raised an additional $170,000. We believe the $516,489 in cash on hand at
June 30, 2008 will only be sufficient to sustain operations through the third
quarter of 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.





20


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.





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 $100,000. At June 30, 2008, we had approximately $279,750 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.





21


Item
3.Quantitative
and Qualitative Disclosures about Market Risk.





Not
applicable.




Item
4T. Controls and Procedures.







Our
Chief Executive Officer, Joseph Mangiapane, Jr., and Principal Financial
Officer, Terence Davis, have 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.









22







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 the third quarter of 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.





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




23


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.





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 we completed the merger with
GBI.  Additionally, we have acquired a minority interests in a FINRA
broker/dealer.  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.








24








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.





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.





25


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.





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




26
 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.





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.





27


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.





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 June 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.  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.








28





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
April 2, 2008, we issued 5,000 shares of our common stock to an employee for
services. We believe that the issuance of shares described above was exempt from
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2). The shares were issued directly by us and did not
involve a public offering or general solicitation. The recipient of the shares
was afforded an opportunity for effective access to files and records of our
company that contained the relevant information needed to make his investment
decision, including our financial statements and 34 Act reports. We reasonably
believed that the recipient, immediately prior to receiving the shares, had such
knowledge and experience in our financial and business matters that he was
capable of evaluating the merits and risks of his investment. The recipient had
the opportunity to speak with our management on several occasions prior to his
investment decision.




On
April 3, 2008, Michael Sederoff, our former chief financial officer, executed a
two year lock-up agreement with us wherein Mr. Sederoff agreed not to sell his
25,000 shares of common stock, received as part of his prior employment
agreement with us, for a period of two years and Mr. Sederoff waived all rights
to receive the additional 13,401 shares of our common stock that had accrued
under the employment agreement and were authorized for issuance as of December
31, 2007. Therefore, the 13,401 shares will not be issued and the authorization
for issuance was revoked.





On
June 2, 2008, we issued 1,200,000 shares of restricted common stock to Grant
Bettingen Trustee of the Bettingen 1999 Trust U/D/T October 8, 1999 for the
remaining 79% (90 shares) of the outstanding securities of GBI. In addition, we
granted stock options to purchase up to 500,000 common shares pursuant to the
employment agreement between GBI and Grant Bettingen. The options have an
exercise price of $1.00 and are exercisable for five years from the grant date.
The options vested immediately.




We
believe that the issuance of the shares and grant of options described above
were exempt from registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2). The shares and options were
issued directly by us and did not involve a




29
  public
offering or general solicitation. The recipient of the shares and options was
afforded an opportunity for effective access to files and records of the
Registrant that contained the relevant information needed to make his investment
decision, including our financial statements and 34 Act reports. We reasonably
believed that the recipient, immediately prior to issuing the shares and
granting the options, had such knowledge and experience in our financial and
business matters that he was capable of evaluating the merits and risks of his
investment. The recipient had the opportunity to speak with our management on
several occasions prior to his investment decision.





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 not been cancelled; however, it is anticipated that the
shares will be cancelled on or before August 31, 2008.




On
June 24, 2008, we issued 2,500 shares (17,500 in total) of restricted common
stock to each member of our Board of Director’s for their services. We believe
that the issuance of shares was exempt from registration and prospectus delivery
requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares
were issued 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 files and records of our company 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, who
are directors, immediately prior to receiving the shares, had such knowledge and
experience in our financial and business matters that they were capable of
evaluating the merits and risks of their investment. The recipients had the
opportunity to speak with our management on several occasions prior to their
investment decision.





Issuer
Purchases of Equity Securities





We did not repurchase any of our equity
securities during the quarter ended June 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 first quarter of 2008.





Item
5. Other Information.





None.





30


Item
6.  Exhibits.




Incorporated
      by referenceExhibit
                Exhibit
      Description
                Filed
      herewith
                Form
                Period
      ending
                Exhibit
                Filing
      date2.1
                Agreement
      and Plan of Merger Between ISSG, Inc. and Rub Investments,
      Inc.
                
                8-K
                
                2.1
                05/17/052.2
                Delaware
      Certificate of Merger
                
                8-K
                
                2.2
                06/13/052.3
                Nevada
      Articles of Merger
                
                8-K
                
                2.3
                06/13/052.4
                Merger
      Agreement between Rubicon Financial Incorporated, ISSG Sub, Inc. and
      Rubicon Financial Insurance Services
                
                8-K
                
                2.4
                02/23/072.7
                Merger
      Agreement among Rubicon Financial Incorporated, RFI Sub, Inc. and Grant
      Bettingen, Inc.
                
                8-K
                
                2.7
                07/05/072.7(b)
                Amendment
      No. 1 to the Merger Agreement among Rubicon Financial Incorporated, RFI
      Sub, Inc. and Grant Bettingen, Inc.
                
                8-K
                
                2.7(b)
                09/14/072.7(c)
                Amendment
      No.2 to the Merger Agreement among Rubicon Financial Incorporated, RFI
      Sub, Inc. and Grant Bettingen, Inc., dated January 23,
2007
                
                8-K
                
                2.7(c)
                01/24/082.7(d)
                Amendment
      No. 3 to the Merger Agreement among Rubicon Financial Incorporated, RFI
      Sub, Inc. and Grant Bettingen, Inc., dated March 18, 2008
                
                
                
                2.7(d)
                03/21/082,7(e)
                Agreement
      of Merger between RFI Sub, Inc. and Grant Bettingen, Inc. dated June 2,
      2008
                
                8-K
                
                2.7(e)
                06/06/082.8
                Separation
      and Distribution Agreement by and between Rubicon Financial Incorporated
      and Dial-A-Cup, Inc.
                
                8-K
                
                2.8
                08/06/073.1(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)
                04/05/0610.1
                Agreement
      and Plan of Merger between ISSG, Inc. and Advantage Investment Strategies,
      Inc.
                
                8-K
                
                10.1
                04/18/0610.2
                Termination
      Agreement between ISSG, Inc. and Advantage Investment
      Strategies
                
                8-K
                
                10.2
                07/20/0610.3
                Employment
      Agreement with Joseph Mangiapane, Jr.
                
                8-K
                
                10.3
                01/17/0710.4
                Employment
      Agreement with Todd Torneo
                
                8-K
                
                10.4
                02/23/0710.5
                Employment
      Agreement with Michael Sederoff
                
                8-K
                
                10.5
                02/23/0710.6
                Employment
      Agreement with Thomas Jandt
                
                8-K
                
                10.610.7
                Employment
      Agreement with Joel Newman
                
                10-QSB
                06/30/07
                10.7
                08/17/0710.8
                Stock
      Cancellation Agreement
                
                8-K
                
                10.8
                08/06/0710.9
                Share
      Purchase Agreement   between Rubicon Financial Incorporated
      and Grant Bettingen, Inc.
                
                8-K
                
                10.9
                09/14/0710.10
                Consulting
      Agreement with Ms. Kathleen McPherson
                
                8-K
                
                10.10
                09/14/0710.11
                Employment
      Agreement with Mr. Tom Collier
                
                10-QSB
                09/30/07
                10.11
                11/13/0710.12
                Amendment
      No. 1 to GBI Stock Purchase Agreement dated March 18, 2008
                
                8-K
                
                10.12
                03/21/0810.13
                Employment
      Agreement with Terence Davis
                
                10-K
                12/31/07
                10.13
                03/31/0810.14
                Employment
      Agreement with Craig Triance
                
                10-Q
                03/31/08
                10.14
                05/14/0810.15
                Sederoff
      Lock-Up Agreement
                
                10-Q
                03/31/08
                10.15
                05/14/0810.16
                Newman
      Lock-Up Agreement
                
                10-Q
                03/31/08
                10.16
                05/14/0810.17
                Employment
      Agreement between GBI and Grant Bettingen
                
                8-K
                
                10.17
                06/06/0810.18
                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 Officer, pursuant to Section
      302 of the Sarbanes-Oxley Act
                X31.2
                Certification
      of Terence Davis, Principal Financial Officer, pursuant to Section 302 of
      the Sarbanes-Oxley Act
                X32.1
                Certification
      of Joseph Mangiapane, Jr., Chief Executive Officer, pursuant to Section
      906 of the Sarbanes-Oxley Act
                X32.2
                Certification
      of Terence Davis, Principal Financial Officer, pursuant to Section 906 of
      the Sarbanes-Oxley Act
                X




31


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/ Terence
Davis


Terence
Davis, President


(On
behalf of the Registrant and as Principal Financial


Officer)







Date:
August 13, 2008





32