U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB
(Mark One)

   [ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

     For the fiscal year ended December 31, 2003

   [   ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE  ACT OF 1934

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

      Commission file number     000-49679
                                 ---------

                                 LITFUNDING CORP
                  ( Debtor-in-Possession) Formerly known as RP
                               ENTERTAINMENT, INC.
                 (Name of small business issuer in its charter)

                                      6611

             NEVADA                                                   93-1221399
   (State or other jurisdiction of                              (I.R.S. Employer
   incorporation or organization)                            Identification No.)

     5757 Wilshire Boulevard, Suite PH10
     LOS ANGELES, CALIFORNIA                                             90036
 (Address of principal executive offices)                             (Zip code)

Issuer's telephone number (323) 857-0448

Securities registered under Section 12(b) of the Exchange Act:

          NONE

Securities registered under Section 12(g) of the Exchange Act:

                 COMMON STOCK, $.001 PAR VALUE PER SHARE

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
    ---      ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ]

     State issuer's revenues for its most recent fiscal year:  $1,535,613

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid  and ask prices of such stock, as of the close of business on March 31, 2004
     Approximately $ 1.4 million State the number of shares outstanding of each
     of the issuer's class of
common equity: 9,410,850 shares of common stock, $.001 par value per share were
outstanding as of March 31, 2004.

     Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securites under a plan confirmed by a court
                           Yes
     Documents incorporated by reference:  n/a

Transitional Small Business Disclosure format (check one):

                            Yes              No



                                       1
<PAGE>


                                 LITFUNDING CORP
                       (Debtor-in-Possession) FORM 10-KSB
                                TABLE OF CONTENTS

PART I                                                                Page
                                                                      ----

     Item 1.     Description of Business............................    3
     Item 2.     Description of Property............................    6
     Item 3.     Legal Proceedings..................................    6
     Item 4.     Submission of Matters to a Vote of Security Holders    6

PART II

     Item 5.     Market for Common Equity and Related
                 Stockholder Matters................................    6
     Item 6.     Management's Discussion and Analysis or Plan
                 of Operation.......................................    6
     Item 7.     Financial Statements...............................    8
     Item 8.     Changes In and Disagreements With Accountants
                 on Accounting and Financial Disclosures............    9

PART III

     Item 9.     Directors, Executive Officers, Promoters and
                 Control Persons; Compliance with Section 16(a)
                 of the Exchange Act................................    9
     Item 10.    Executive Compensation.............................   10
     Item 11.    Security Ownership of Certain Beneficial
                 Owners and Management..............................   10
     Item 12.    Certain Relationships and Related
                 Transactions.......................................   10
     Item 13.    Exhibits and Reports on Form 8-K...................   11

SIGNATURES..........................................................   12

INDEX TO FINANCIAL STATEMENTS ......................................  F-1



                                       2
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

INTRODUCTION

LitFunding Corp (formerly known as RP Entertainment, Inc.) was organized in the
state of Nevada on July 11, 1996. It owns all of the common stock of California
LitFunding. LitFunding Corp is the holding company in this corporate
relationship. It has limited assets, no payroll, and no operations. In contrast,
California LitFunding serves as the primary operating entity. It owns
substantially all of operating assets, it employs all of the personnel, and it
pays the obligations of both corporations.

California LitFunding is the successor-in-interest by merger to the "original"
company in the corporate structure that now exists. LitFunding Corp., a
California corporation was the "original company" in this corporate family. It
started investing in litigation recoveries in 2000. In 2001, LitFunding Corp., a
California corporation, decided to provide its shareholders the benefit of
publicly tradable stock through a reverse triangular merger. Such a merger is a
common means for a small entity to go public while preserving its favorable tax
attributes. To accomplish this merger, in 2003, the principals of LitFunding
Corp., a California corporation, acquired control of RP Entertainment, Inc., a
publicly held Nevada corporation, organized in the state of Nevada on July 11,
1996, and they formed RP Acquisition Corp., a Nevada corporation, as a wholly
owned subsidiary of RP Entertainment. Using these three entities, a reverse
triangular merger plan was developed (the "Merger Plan").

Under the Merger Plan, the shareholders of LitFunding Corp., a California
corporation, exchanged their shares for shares in the publicly held RP
Entertainment, Inc., which was renamed LitFunding Corp., a Nevada corporation.
LitFunding Corp., a California corporation, then changed its name to California
LitFunding, and it became a wholly owned subsidiary of RP Acquisition Corp. This
merger was finalized on January 23, 2004, through the filing of the Articles of
Merger for RP Acquisition. Upon this filing, California LitFunding, a California
company, was merged into RP Acquisition, a Nevada company, which assumed title
to all of its assets and liabilities. RP Acquisition then changed its name to
California LitFunding. RP Acquisition, newly renamed California LitFunding, is
now a wholly owned subsidiary of LitFunding Nevada, which serves as the publicly
listed holding company. When the original California LitFunding, a California
Company gave up all its assets, liabilities and operations to RP Acquisition, it
changed its name to CA Funding so that the corporate husk could be dissolved in
California. LitFunding Corp owns all of the shares in a dormant Nevada
corporation named E.Evolution Expeditions formed on February 25, 2000 as well as
all the shares in a newly formed corporation named LitFunding USA formed in
Nevada on March 22nd, 2004.


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<PAGE>

BUSINESS OF THE COMPANY

California LitFunding has been in the business of investing in litigation
recoveries since 2000. In summary, California LitFunding raises capital and
advances this capital to various law firms pursuant to "Settlement Agreements".
These Settlement Agreements provide that the funds advanced shall be repaid to
California LitFunding, plus a fee, when the lawsuits referenced in the agreement
ultimately settle. The exact amount of the fee payable on the funds advanced
depends upon the length of time the fund are outstanding, up to a fixed limit.
Pursuant to the terms of the Settlement Agreements, California LitFunding's
contractual right to payment is limited to the funds ultimately paid to the law
firm from the specified lawsuit, or lawsuits, in which the funds are invested or
expended.

LitFunding Corp., and California LitFunding (the "Companies") have been
embroiled in expensive and counterproductive litigation since April 2, 2003 when
certain individuals and entities of LitFunding Corporation, a Nevada corporation
filed an involuntary bankruptcy petition against it Company in the United States
Bankruptcy Court, Central District of California, Case No. LA03-19005 ES (the
"Petition"). This case was subsequently converted to a voluntary chapter 11
proceeding and is more fully explained below in Item 3., Legal Proceedings.

In February 2004, the companies entered into a settlement agreement with the
petitioning creditors. The terms of this settlement are currently incorporated
and made a part of, the Companies' Joint Chapter 11 Plan of Reorganization and
there is a confirmation hearing for that plan on May 26, 2004. The Settlement
Agreement provides, among other things, for the dismissal of all litigation
between the parties promptly after the confirmation of the reorganization Plan.
This resolution will bring to a close of over eleven months of litigation
between the parties and will allow the companies to restart the business which
was effectively stalled and damaged by the litigation. An integral part of the
Companies prospective business plan involves raising additional funds for
investment in lawsuits. Since different segments of the capital markets may
desire different investment structures and investment vehicles, the Companies
cannot predict exactly how funds will be invested with the Companies after the
effective date of the reorganization plan in each instance. Initially, it is
anticipated that the new funding will be obtained from private parties and
investment groups, and that this funding will be in the form of loans. The
financing party will be granted a first priority lien on all of the lawsuits
that they invest in. Once the obligations owed to the capital source are
satisfied, California LitFunding or another wholly subsidiary of LitFunding
Nevada, will receive the balance of the distributions.


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<PAGE>

COMPETITION

   The industry in which the Companies operate is extremely competitive and
include major corporations with substantially greater resources than the
Company, including but not limited to, financial, personnel and established
relationships in the industry. Additionally, the Companies will have to
reestablish their credibility and presence in the market place after the
effective Date of the reorganization plan.


INTELLECTUAL PROPERTY /COMPETITION

   We use the Trade names of LitFunding, California LitFunding, LitFunding USA
and CA Funding. Other than an expertise in assessing underwriting risks and the
Companies database and experience of success with various lawyers and law firms,
the companies business is not dependant upon proprietary information.
Accordingly, there are no substantial barriers to competitors entering the
market. The Companies acknowledge that they may not be able to compete
successfully against future competitors with greater financial resources or
access to potential business. Additionally, it is possible that competition may
drive down the return on the Companies advances and that may negatively impact
the viability of the Companies business model.

EMPLOYEES

(As of December 31 2003, the California LitFunding had 10 full time employees
and one part time employee. LitFunding Corp had no full time or part time
employees. Because of the Legal proceedings described below in Item 3., the
companies have experienced a deleterious and damaging loss of key personnel that
will have to be replaced and future performance will in part depend on the
companies ability to attract, train and retain the personnel.

Dr. Morton Reed CEO and President, Mr. Stanley Weiner VP Finance and David Cohen
CFO form the nucleus of the key management team. The companies will begin
recruiting new in-house counsel, collection specialists and financial personnel
after the effective date of the reorganization plan. In the interim, the
companies will rely on outside professionals for assistance in matters where
there is no in-house expertise.



                                       5
<PAGE>


ITEM 2. DESCRIPTION OF PROPERTY

The Companies has offices at 5757 Wilshire Boulevard, Suite PH10, Los Angeles,
CA 90036 comprised of approximately 6,000 sq feet. (Please insert description of
lease terms) The companies have rejected the lease for these premises as part of
their reorganization plan and will be moving to new premises no later than June
30, 2004.

ITEM 3. LEGAL PROCEEDINGS

On April 2, 2003 certain individuals and entities of LitFunding Corporation, a
Nevada corporation (the "Company"), filed an involuntary bankruptcy petition
against the Company in the United States Bankruptcy Court, Central District of
California, Case No. LA03-19005 ES (the "Petition"). Seven additional parties
(collectively the "Petitioners") later filed joinders in support of the
Petition. The filing of the Petition severely damaged both the Company, and its
wholly owned operation subsidiary, California LitFunding, for the following
reasons:

     o     The filing made it virtually impossible for California LitFunding to
           raise and invest funds in new lawsuits, which is its core business.

     o     California LitFunding was forced to expend significant amounts of
           money filing and preparing collection lawsuits against parties to
           various settlement agreements who viewed the filing of the Petition
           as an opportunity to renege on their contractual obligations, or to
           secure a discounted payoff.

     o     California LitFunding's business reputation was devastated by the
           filing, and this enabled competitors to capitalize on its perceived
           financial problems.

The Company believes that the Involuntary Petition was filed without legal basis
and in bad faith and was really a disguised takeover attempt.

The Company spent eleven months contesting the Petition, and it expended
significant resources on this effort. The material facts relative to this
litigation, and the Company's recent entry into a Chapter 11 proceeding, are
summarized below:

     o     On May 15, 2003, the Company moved the United States Bankruptcy Court
           (the "Court") for an order dismissing the Petition. The Court treated
           the Company's motion as one for summary judgment and denied it on the
           grounds that there were disputed factual issues that would require an
           evidentiary hearing;

     o     On June 19, 2003, the Petitioners moved the Court for an order
           appointing an interim trustee. The Court denied that motion. The
           court also set the matter for trial on August 28 and August 29, 2003;


                                       6
<PAGE>

     o     In July, the Court continued the trial, upon application by the
           Petitioners, until September 23, 2003. Subsequently, the Court
           continued the matter to November 24 and 25th 2003 and ordered the
           parties to mediation;

     o     A two day mediation occurred in September of 2003. Unfortunately,
           this mediation was unsuccessful. Approximately ten days after the
           mediation failed, counsel for the Petitioners sought a meeting to
           present another settlement proposal. A meeting was held on October
           10, 2003, a Friday, to consider this proposal. This meeting was
           attended by the President of the Company and its counsel. At the
           conclusion of this meeting the parties entered into a stipulation
           (the "Stipulation"). In summary, the Stipulation provided: (1) the
           Petitioners would convert their involuntary Chapter 7 proceeding to a
           Chapter 11 proceeding; (2) the Company would consent to the entry of
           an order of relief under Chapter 11; (3) the Company would reserve
           all of its rights to seek damages against the Petitioners relating to
           the bad-faith filing of the involuntary petition; and (4) the
           Petitioners agreed not to seek the appointment of a trustee for six
           months. California LitFunding was not a party to this stipulation.

     o     Since the Stipulation provided for a consensual Chapter 11 filing,
           the Company believed that it required the formal approval of the
           Company's board of directors prior to being valid and binding under
           Nevada law. Accordingly, on the very next business day, October 13,
           2003, the Company's board of directors met to consider the
           Stipulation. After carefully considering the merits of the
           Stipulation, the board of directors voted to reject the Stipulation
           as written, because there were provisions therein that could
           negatively impact the ability of the Company's operating subsidiary,
           California LitFunding, to raise capital prospectively, even though
           California LitFunding was not entering into bankruptcy proceeding
           under this agreement. Although the Petitioners were informed of this
           vote, they elected to file the Stipulation with the Court, and
           thereafter they endeavored to enforce the Stipulation through a
           motion (the "Motion To Enforce"). In the Motion To Enforce, the
           Petitioners contended, among other things that the Stipulation was
           enforceable without the necessity of a vote of the Company's board of
           directors.

     o     On November 14, 2003, a hearing was held on Motion To Enforce. A
           hearing on a motion filed by LitFunding Nevada seeking an order
           compelling the Petitioners to post a bond to secure any prospective
           damage judgment the Company might obtain against the Petitioners for
           the wrongful involuntary filing was heard on the same date. After
           considering the arguments of both parties, the Court concluded that
           the Stipulation was enforceable. Accordingly the Court granted the
           Motion To Enforce. An order for relief placing the Company into a
           Chapter 11 proceeding was entered by the Court on November 19, 2003.
           The Court also ordered the Petitioners to post a bond in the amount
           of $500,000, which was done in January 2004 after the petitioners
           received one 10 day extension from the Company and two more
           extensions from the court.


                                       7
<PAGE>

As a result of the foregoing:

     o     The Company was placed into Chapter 11 proceeding effective November
           19, 2003. The costs of litigating the merits of the Involuntary
           Petition, and the financial impact of the pending involuntary, so
           materially damaged both the Company and California LitFunding that it
           ultimately became necessary for both companies (together the
           "LitFunding Companies") to enter into Chapter 11. Accordingly,
           California LitFunding entered into a Chapter 11 proceeding on January
           26, 2004.

     o     Since April 2, 2003, the Company has made several offers of
           settlement to the Petitioners.

     o     On January 31, 2004, the LitFunding Companies filed a Joint Plan of
           Reorganization (the "Plan") and a supporting Disclosure Statement
           with the United States Bankruptcy Court and have since amended that
           plan to recognize the realities of the settlement discussed below.

     o     The Companies have various lawsuits claiming damages against a former
           director of California LitFunding, and an ex employee for wrongdoing,
           breach of fiduciary responsibility, and theft of proprietary
           information.

Settlement:

In February 2004, The Companies entered into a settlement agreement with the
petitioning creditors (the "Settlement Agreement"). The terms of this settlement
are currently incorporated into a letter agreement. However, pursuant to the
agreement between the parties, the terms of the settlement are being
incorporated into, and made a part of, the Companies' Joint Chapter 11 Plan of
Reorganization (the "Reorganization Plan") set for a confirmation hearing on May
26th 2004.

The Settlement Agreement provides, among other things, for the dismissal of all
litigation between the parties promptly after the confirmation of the
Reorganization Plan. This resolution will bring to a close of over eleven months
of litigation between the parties.


                                       8
<PAGE>

The most significant achievements reached in the settlement include:

     o     The dismissal with prejudice of all litigation between the parties
           effective upon the confirmation of the Reorganization Plan. However,
           the Settlement Agreement does not provide for the dismissal of the
           litigation pending between the Companies and a former employee
           regarding his alleged claims against the Companies, and the Companies
           counter-claims against this employee, nor does it dismiss litigation
           pending between an individual that is seeking compensation for
           bookkeeping services provided to the Companies prepetition. The
           Companies do not consider these litigation matters to be material and
           it does not believe that they have any merit;

     o     The consensual treatment of the claims held by parties that advanced
           funds to the Companies pursuant to Investment/Equity Participation
           Agreements (the "IEP Claimants"). In summary the terms of the
           Settlement Agreement provide that the claims held by the IEP
           Claimants will be incorporated into a single promissory note (the
           "IEP Plan Note"), which is recourse to only the collections from the
           lawsuits that predate the Settlement Agreement; and

     o     An approved overhead allocation in favor of the Companies payable
           from collections from the lawsuit investments. However, if for any
           reason the IEP Plan Note is not paid in full, the Companies will
           become obligated to repay to the IEP Claimants a sum equal to the
           lesser of the shortfall on the IEP Plan Note, or the amount of the
           overhead charge advanced to the Companies under the terms of the
           Settlement Agreement.

o        Prior to the hearing on the Reorganization Plan, the Companies have
         receieved overwhelming creditor support for the approval of the Plan. A
         total of 90 votes were cast by creditors holding valid claims. Of this
         total, Eighty Six (86) voted in favor of the plan representing an
         approval rate of approximately 96%. In terms of dollars, the claims
         that voted in favor of the plan totaled $18 million. The allowed claims
         that voted against the Plan totaled only $343,000.

o        Although there is no assurance that the Reorganization Plan proposed by
         the Companies will be approved by the United States Bankruptcy Court,
         the Companies believe that the likelihood of court approval has
         substantially increased with the advent of the foregoing settlement.

The resolution of the pending litigation with the IEP Claimants will enable the
Companies to refocus their efforts on collecting delinquent accounts receivable
owed by certain attorney/clients who received litigation advances from the
Companies, but who have failed to repay these obligations.

The Companies have established a new subsidiary of the holding company,
LitFunding USA, which will be responsible for all future funding of cases. This
new subsidiary will also manage and collect the portfolio of California
LitFunding to satisfy the requirements of the settlement with the petitioners.



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<PAGE>

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

         There were no submissions to a vote of security holders during 2003.


                                     PART II

ITEM 5. MARKETS FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Reports to Security Holders. We are a reporting company with the Securities and
Exchange Commission, or SEC. The public may read and copy any materials filed
with the SEC at the SEC's Public Reference Room at 450 Fifth Street N.W.,
Washington, D.C. 20549. The public may also obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address of that site is http://www.sec.gov.

(Indicate how many shares are authorized for both common and preferred stock,
indicate how may are issued and outstanding for each class) As of March 31,
2004, there were 9,410,850 shares of common stock issued and outstanding and
25,000,000 shares authorized. (Indicate how many options, warrants, or
convertible securities are outstanding. During the years ended December 31, 2003
and 2002, the Company issued 5-year 9% convertible debentures amounting to
$200,000, due January 1, 2007. The registered holders of the debentures have the
right, after one year prior to maturity, to convert the principal at the
original conversion price of $10 for one Common share or at the adjusted
conversion price.

Equity Compensation Plans. Indicate whether there are securities authorized for
issuance under any equity compensation plansLitFundingLitFundingLitFunding.
LitFunding Corp adopted the employee stock option plan from RP Entertainment
Inc. See S8 filed on September 10, 2003.

We participate in the OTC Bulletin Board, an electronic quotation medium for
securities traded outside of the Nasdaq Stock Market, and prices for our common
stock are published on the OTC Bulletin Board under the trading symbol "LFDG".
This market is extremely limited and the prices quoted are not a reliable
indication of the value of our common stock. As of May 21, 2004, tLitFundinghere
have been very few and limited trades in the LitFunding Corp common stock.

The Company has not declared or paid any cash dividends on its common stock
since its formation, and the board of directors currently intends to retain all
of its earnings, if any, for its business. The declaration and payment of cash
dividends will be at the discretion of the board of directors.


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<PAGE>

Penny Stock Regulation. Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer practices
in connection with transactions in "penny stocks". Penny stocks are generally
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:

    o    a description of the nature and level of risk in the market for penny
         stocks in both public offerings and secondary trading;
    o    a description of the broker's or dealer's duties to the customer and of
         the rights and remedies available to the customer with respect to
         violation to such duties or other requirements of securities' laws;
    o    a brief, clear, narrative description of a dealer market, including
         "bid" and "ask" prices for penny stocks and the significance of the
         spread between the "bid" and "ask" price;
    o    a toll-free telephone number for inquiries on disciplinary actions;
    o    definitions of significant terms in the disclosure document or in the
         conduct of trading in penny stocks; and
    o    such other information and is in such form (including language, type,
         size and format), as the Securities and Exchange Commission shall
         require by rule or regulation.

Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:

    o    the bid and offer quotations for the penny stock;
    o    the compensation of the broker-dealer and its salesperson in the
         transaction;
    o    the number of shares to which such bid and ask prices apply, or other
         comparable information relating to the depth and liquidity of the
         market for such stock; and
    o    monthly account statements showing the market value of each penny stock
         held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.


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<PAGE>


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FROM INCEPTION TO DECEMBER 31, 2003

THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF
MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT
ESTIMATE THE HAPPENING OF FUTURE EVENTS ARE NOT BASED ON HISTORICAL FACT.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE",
"ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR
SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN
COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND
CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS,
HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY
IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.


THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN
THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT
TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND
OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA
AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM
AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE
EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY
FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED
ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE
GIVEN THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS
SPECIFIED IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION
TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.


CRITICAL ACCOUNTING POLICY AND ESTIMATES.
------------------------------------------

Our Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgments, including those related to
revenue recognition, accrued expenses, financing operations, and contingencies
and litigation. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions. The most significant accounting estimates
inherent in the preparation of our financial statements include estimates as to
the appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources, primarily allowance for doubtful accounts
receivables, accruals for other costs, and the classification of net operating
loss and tax credit carry forwards between current and long-term assets. These
accounting policies are described at relevant sections in this discussion and
analysis and in the notes to the financial statements included in our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2003.


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<PAGE>

Overview

The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Company's financial
statements and the related notes thereto appearing elsewhere herein.

LitFunding Corp (formerly known as RP Entertainment) was organized in the state
of Nevada on July 11, 1996. It owns all of the common stock of California
LitFunding. LitFunding Corp is the holding company in this corporate
relationship. It has limited assets, no payroll, and no operations. In contrast,
California LitFunding serves as the primary operating entity. It owns
substantially all of operating assets, it employs all of the personnel, and it
pays the obligations of both corporations.

California LitFunding is the successor-in-interest by merger to the "original"
company in the corporate structure that now exists. LitFunding Corp., a
California corporation was the "original company" in this corporate family. It
started investing in litigation recoveries in 2000. In 2001, LitFunding Corp., a
California corporation, decided to provide its shareholders the benefit of
publicly tradable stock through a reverse triangular merger. Such a merger is a
common means for a small entity to go public while preserving its favorable tax
attributes. To accomplish this merger, in 2003, the principals of LitFunding
Corp., a California corporation, acquired control of RP Entertainment, Inc., a
publicly held Nevada corporation, organized in the state of Nevada on July 11,
1996, and they formed RP Acquisition Corp., a Nevada corporation, as a wholly
owned subsidiary of RP Entertainment. Using these three entities, a reverse
triangular merger plan was developed (the "Merger Plan").

Under the Merger Plan, the shareholders of LitFunding Corp., a California
corporation, exchanged their shares for shares in the publicly held RP
Entertainment, Inc., which was renamed LitFunding Corp., a Nevada corporation.
LitFunding Corp., a California corporation, then changed its name to California
LitFunding, and it became a wholly owned subsidiary of RP Acquisition Corp. This
merger was finalized on January 23, 2004, through the filing of the Articles of
Merger for RP Acquisition. Upon this filing, California LitFunding, a California
company, was merged into RP Acquisition, a Nevada company, which assumed title
to all of its assets and liabilities. RP Acquisition then changed its name to
California LitFunding. RP Acquisition, newly renamed California LitFunding, is
now a wholly owned subsidiary of LitFunding Nevada, which serves as the publicly
listed holding company. When the original California LitFunding, a California
Company gave up all its assets, liabilities and operations to RP Acquisition, it
changed it's name to CA Funding so that the corporate husk could be dissolved in
California. LitFunding Corp owns all of the shares in a dormant Nevada
corporation named E.Evolution Expeditions formed on February 25, 2000 as well as
all the shares in a newly formed corporation named LitFunding USA formed in
Nevada on March 22nd, 2004.

RESULTS OF OPERATIONS:

The results of operations of the Companies for the year ended December 31, 2003
consisted of primarily the operations of LitFunding Corp (LF) and its 100% owned
subsidiary California LitFunding (CLF). The results of operations for the year
ended December 31, 2002 consisted of the operations of CLF.


                                       13
<PAGE>

REVENUES AND COST OF REVENUES: The Company reported revenues of $1,535,613 and
$2,461,892 during the year ended December 31, 2003 and 2002, respectively. The
decrease in revenue in the year ended December 31, 2003 over a similar period in
the prior year was primarily due to postponement of court hearings and a growing
reluctance of attorneys (clients) to pay the companies amounts due them.
Apparently in the mistaken belief that the filing of the involuntary bankruptcy
petition against LitFunding Corp on April 2nd, 2003 and subsequent litigation
and filings of voluntary chapter 11's for LitFunding Corp and California
LitFunding would give them the opportunity to pay cents on the dollar or nothing
at all.

General and administrative expenses were $3,425,009 and $3,458,599 during the
year ended December 31, 2003 and 2002, respectively. Reserve for unsuccessful
resolution of lawsuits and related accounts receivable (on settled cases) went
down to $1,267,824 in the year ended December 31, 2003 as compared to $2,136,487
in the year ended December 31, 2002. Loss from operations was $4,105,923 and
$4,496,691 during the year ended December 31, 2003 and 2002, respectively. The
decrease in losses was not a large as it should have been primarily due to the
expenditure of more than $1million dollars in legal and related expenses
incurred during 2003 in the defense of the companies against the filing of the
involuntary bankruptcy petition against LitFunding Corp on April 2nd, 2003 and
subsequent related litigation.

Interest expense of $4,056,467 for the year ended December 31, 2003 and
$2,945,511 for the year ended December 31, 2002 is related directly to disputed
transactions that led to the filing of the involuntary bankruptcy petition
against LitFunding Corp on April 2nd 2003 and subsequent related litigation. The
accrual of these expenses has significantly affected the net loss for the years
ended December 31, 2003 and 2004.

In February 2004, the Companies reached agreement with the petitioning creditors
and that plan has been incorporated into a reorganization plan scheduled for a
confirmation hearing on May 26, 2004. The totality of all claims held by the
petitioners have been incorporated into a plan note that will have an opening
balance of $ 26,111,763 as of May 1, 2004. The accounting for this note may
affect prior year financial statements when it is confirmed by the court and
subsequently booked.

Net loss for the Year ended December 31, 2003 was $8,197,244 as compared to
$7,443,002 for the year ended December 31, 2002. The basic and diluted net
losses per share were $0.92 and $0..98 during the year ended December 31, 2003
and 2002, respectively.

LIQUIDITY AND CAPITAL RESOURCES: The Companies principal capital requirements
during the year 2004 are to fund the internal operations, defend it self from
the litigation described in Part II, Item 1, below and fund the restart of the
business subsequent to the confirmation of the reorganization plan. The
Companies plan to raise necessary funds by selling its own common shares or
through the sale of interest bearing debentures to selected investors or a
combination of these. The Companies will also consider establishing
relationships with selected business partners whose contributions include
necessary cash.


                                       14
<PAGE>

As shown in the accompanying financial statements, the Companies incurred a net
loss of $8,197,244 for the year ended December 31, 2003 as compared to a net
loss of $7,443,002 for the same period in 2002. Additionally, in accordance with
GAAP, the Company's total liabilities exceeded its total assets by $15,085,995
at December 31, 2003. In the ordinary course of events, this would raise
substantial doubt about the companies ability to continue as a going
concern. However, it is important to note that the companies recognizes revenue
from advances only when a case has been resolved and when it is confident that
fees calculated will in fact be realized. As of December 31, 2003, if the
Companies made no further advances to plaintiffs or their attorneys, the
Companies can reasonably expect to collect approximately $30 to 36 million in
fees and return of principal over the next 12-24 months from open cases. The
estimate is based on historical performance and other factors affecting each
case.

OPERATING ACTIVITIES: During the year ended December 31, 2003, net cash used in
operating activities decreased to $403,896 compared to net cash used in
operating activities of $13,053,020 during the same period in 2002. The decrease
in net cash used from operating activities resulted primarily from fewer funds
being available for advances to plaintiffs and their attorneys as the companies
devoted their energy to defending itself against the involuntary bankruptcy
petition filed against LitFunding Corp on April 2nd, 2003 and subsequent related
litigation. Other factors include the positive cash flow from prepaid commission
of $864,196 in 2003 as compared to usage of cash from prepaid commission of
$163,608 in the same period last year.

In addition, Petitioner characterized (and Company disputed) interest payable
at December 31th, 2003, almost all of which is included in the litigation
described in Part 11 Item 1 below was $3,905,048

INVESTING ACTIVITIES: Net cash used in investing activities during the year
ended December 31, 2003 was $35,579 as compared to $57,059 for the same period
in 2002.

FINANCING ACTIVITIES: Net cash provided by financing activities during the year
ended December 31, 2003 was $216,436 as compared to cash provided by the
financing activities of $10,735,762 during the same period in 2002. Decrease in
cash flow from financing activities was mainly due to decrease in proceeds from
investor participation and the inability of the companies to find new sources of
capital while it was defending it self from the involuntary bankruptcy petition
filed against LitFunding Corp on April 2nd, 2003 and subsequent related
litigation.

As a result of the above activities, the Companies experienced a net decrease in
cash of $233,039 for the year ended December 31, 2003 as compared to a net
decrease of $2,374,317 in the year ended December 31, 2003.

The Companies do not have any material capital expenditure commitments as of
December 31, 2003.


                                       15
<PAGE>

The Companies fully expects that it will be able to meet its contractual
commitments under the plan of reorganization to be heard in a confirmation
hearing on May 26, 2004. Additionally, the companies are actively working on
attracting new sources of capital to restart the business and expects that it
will be able to finalize some of these arrangements shortly after the effective
date of a successful confirmation hearing on the reorganization plan.


FACTORS THAT MAY AFFECT FUTURE RESULTS:

The Companies cash flow is dependant on a lengthy collection cycle and factors
beyond its control that may require the company to obtain interim financing.

The Companies collection cycle on advances made is lengthy. Based on the
Companies experience, cases may take between 12 and 24 months to reach
resolution. The larger cases may take longer than that. Once the Companies
advance the money, the collection cycle is out of the Companies control. This
may force the Companies to seek other sources of capital to fund its overhead
expenses. There can be no assurance that in such an event the Companies could
find such financing or that, if it could, the financing would be available on
satisfactory terms.


THE COMPANY HAS A LIMITED OPERATING HISTORY AND LACK OF PROFITABILITY:

The Companies began business in late 2000 and have a limited operating history.
During that time, the Companies have incurred losses in every quarter since
inception and they are subject to the risks and uncertainties usually
encountered by early stage companies.

In the past, the Companies attracted large well known firms of attorneys as
clients. This too has been negatively impacted by the litigation against the
Companies described in Part 11, Item 1, below. The company has not yet
experienced an appreciable inability to attract the talent that it needs.
However risks remain that the Companies will not attract, train or integrate
into the business organization qualified personnel. Additionally, it is fair to
expect that that fluctuations in operating results may be significant as the
Companies develop and tests business practices. There is also the risk that the
Companies will fail to properly manage growth and expansion, if and when it
occurs.


                                       16
<PAGE>

THE COMPANIES ABILITY TO EXPAND IS LIMITED BY JURISDICTIONAL
LIMITATIONS:

Not all states allow advances to plaintiffs' attorneys and plaintiffs. Some
jurisdictions do not allow maintaining, supporting, promoting or assisting
another person, with money or otherwise, to prosecute a lawsuit. The Companies
are of the opinion that there is more than enough business to pursue in those
states that do allow these advances but also acknowledges that at some
indeterminate time in the future, an inability to expand beyond such
jurisdictions may

negatively impact its business, prospects and results of operations. Although
the Companies have not been able to relocate the business and associated assets
to the State of Nevada because of the actions of the improper filing of the
involuntary, there is now an expectation that the Companies will move to Las
Vegas by late summer 2004 and they have begun to scout for office space in that
city.

COMPANY COMMON STOCK IS LISTED ON THE OVER-THE COUNTER (OTC) BULLETIN BOARD
WHICH MAY MAKE IT MORE DIFFICULT FOR STOCKHOLDERS TO SELL THEIR SHARES AND MAY
CAUSE THE MARKET PRICE OF COMPANY COMMON STOCK TO DECREASE:

LitFunding Corp's common stock is listed on the OTC Bulletin Board. Factors that
may affect potential liquidity include limited coverage by security analysts and
the news media. This may negatively affect the prices for shares of LitFunding
Corp common stock. The filings of the involuntary bankruptcy petition against
LitFunding Corp on April 2nd, 2003 and subsequent litigation and filings of
voluntary chapter 11's for LitFunding Corp and California LitFunding Chapter 11'
did have a materially negative effect on the price of LitFunding Corp's stock
and for all intents and purposes that stock had no value for all of 2003.
LitFunding believes that he successful resolution of the litigation will give it
an opportunity to rebuild value in the stock.

THE COMPANY'S STOCK PRICE MAY BE VOLATILE AND AN INVESTMENT IN SUCH COMMON
STOCKCOULD SUFFER A DECLINE IN VALUE:

The market price of LitFunding Corp's common stock may fluctuate significantly
in response to a number of factors, some of which are beyond LitFunding Corp's
control. These factors include:

    o     government regulatory action affecting the Companies services or
          competitors' services;
    o     actual or anticipated fluctuations in operating results;
    o     the loss of key management or other personnel;
    o     the loss of major customers;
    o     the outcome of any future litigation;
    o     broad market fluctuations; and economic conditions in the United
          States or abroad.

LitFundingLitFundingLitFunding
   RESULTS OF OPERATIONS


                                       17
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS




                             LITFUNDING CORPORATION
                             (Debtor-in-Possession)

                     Consolidated Financial Statements as of
                                December 31, 2003
                        And Independent Auditors' Report




                                                                           A-17
LITFUNDING CORP.



TABLE OF CONTENTS
         Independent Accountants' Report                                   A-2
     Consolidated Balance Sheet at December 31, 2003                       A-3
     Consolidated Statements of Operations for the years
       ended December 31, 2003 and 2002                                    A-4
     Consolidated Statements of Stockholder's Equity for the Years
     Ended December 31, 2003 and 2002                                      A-5
     Consolidated Statements of Cash Flows for the Years
       Ended December 31, 2003 and 2002                                    A-6
     Consolidated Statements of Cash Flows for the Years
       Ended December 31, 2003 and 2002
     Notes to Consolidated Financial Statements for the
       Years Ended December 31, 2003 and 2002                              A-8




                                       18
<PAGE>



                         INDEPENDENT ACCOUNTANTS' REPORT


To the Stockholders and Board of Directors of LitFunding Corp.:

We have audited the accompanying balance sheet of LitFunding Corp.
(Debtor-in-Possession) as of December 31, 2003 and the related statements of
operations, stockholders' deficit and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of LitFunding Corp. as of December
31, 2003, and the results of its operations and cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company incurred material net
losses for the year ended December 31, 2003 and liabilities exceed assets by
$15,085,995 at December 31, 2003. The Company has entered into a Chapter 11 Plan
of Reorganization under the United States Bankruptcy Code. The uncertainty of
the Company's ability to raise future funding and the lack of cash flow from
operations raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans with regard to these matters are discussed in
Note 1. The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.


/s/      EPSTEIN, WEBER & CONOVER, PLC
         Scottsdale, Arizona
         MAY 12, 2004


                                       19
<PAGE>


LITFUNDING, CORP.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2003

<TABLE>
<CAPTION>
ASSETS
  <S>                                                                                  <C>
   Cash and cash equivalents                                                   $         51,676
   Accounts receivable, net                                                             740,103
   Contingent advances less reserve for unsuccessful
        resolutions of lawsuit of  $2,909,467                                         9,722,883
   Property and equipment, net of accumulated depreciation of $41,363                    83,801
   Other assets                                                                          19,435
                                                                               -----------------
TOTAL ASSETS                                                                   $     10,617,898
                                                                               =================


LIABILITIES AND STOCKHOLDERS' DEFICIT:

  Accounts payable                                                             $        601,100
  Accrued liabilities                                                                   184,766
  Investor participation obligations                                                 18,814,550
  Lease payable                                                                          25,248
  Interest payable                                                                    5,878,229
  Debentures                                                                            200,000

                                                                               -----------------
      Total liabilities                                                              25,703,893
                                                                               -----------------

STOCKHOLDERS' DEFICIT:
   Common stock,$0.001 par value, 25,000,000 shares
     authorized, 9,410,850 issued and outstanding                                         9,411

   Additional paid-in capital                                                         3,605,900

   Accumulated deficit                                                              (18,701,306)
                                                                               -----------------
      Total stockholders' equity                                                    (15,085,995)
                                                                               -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                    $     10,617,898
                                                                               =================
</TABLE>






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

                                       20
<PAGE>




LITFUNDING CORP.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 2003 AND 2002
----------------------------------------------------



<TABLE>
<CAPTION>
                                                                     2003               2002
                                                                ---------------    ----------------
<S>                                                                   <C>                <C>
NET REVENUE                                                     $    1,535,613      $    2,461,892

OPERATING EXPENSES:
     Selling                                                           948,703           1,363,497
     Reserve for doubtful accounts receviable                          488,075                   -
     Reserve for unsuccessful resolution of lawsuits                   779,749           2,136,487
     General and administrative expenses                             3,425,009           3,458,599
                                                                ---------------    ----------------
         Total expenses                                              5,641,536           6,958,583
                                                                ---------------    ----------------

LOSS FROM OPERATIONS                                                (4,105,923)         (4,496,691)
                                                                ---------------    ----------------

OTHER (INCOME) AND EXPENSES
     Interest (expense), net of interest income                     (4,056,467)         (2,945,511)
     Rental Income                                                      25,000                   -
     Loss on disposal of assets                                         (9,854)                  -
                                                                ---------------    ----------------

     Total other income (expense)                                   (4,041,321)         (2,945,511)
                                                                ---------------    ----------------

(LOSS) BEFORE REORGANIZATION ITEMS AND INCOME TAXES                 (8,147,244)         (7,442,202)

REORGANIZATION ITEMS:
    Legal fees                                                          50,000                   -
                                                                ---------------    ----------------

(LOSS) INCOME BEFORE INCOME TAXES                                   (8,197,244)         (7,442,202)

INCOME TAX (BENEFIT) PROVISION                                               -                 800
                                                                ---------------    ----------------

NET INCOME (LOSS)                                               $   (8,197,244)    $    (7,443,002)
                                                                ===============    ================

NET (LOSS) PER SHARE:
  Basic                                                         $        (0.92)    $        (0.98)
                                                                ===============    ================

  Diluted                                                       $        (0.92)    $        (0.98)
                                                                ===============    ================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  Basic                                                              8,914,770           7,592,250
                                                                ===============    ================

  Diluted                                                            8,914,770           7,592,250
                                                                ===============    ================
</TABLE>




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

                                       21
<PAGE>




LITFUNDING CORP.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>

                                                 COMMON STOCK         PAID-IN          DEFERRED       ACCUMULATED
                                             SHARES      AMOUNT       CAPITAL        COMPENSATION       DEFICIT          TOTAL
                                          ------------ -----------  --------------  --------------  --------------- ----------------
 <S>                                           <C>         <C>           <C>              <C>              <C>             <C>
 BALANCE DECEMBER 31, 2001                  7,592,250   $   7,592    $  4,167,920    $   (118,750)   $  (3,061,060)  $      995,702

   Shares issued for cash                      84,309          84          31,916                                            32,000

   Rescission of shares                    (3,964,157)     (3,964)          3,996                                                32

   Shares redemption                       (1,466,251)     (1,466)       (998,534)                                       (1,000,000)

   Amorization of deferred compensation                                                    39,000                            39,000

   Shares issued for services                  54,984          55         299,945                                           300,000

   Net loss                                                                                             (7,443,002)      (7,443,002)
                                          ------------ -----------  --------------  --------------  --------------- ----------------

 BALANCE DECEMBER 31, 2002                  2,301,135       2,301       3,505,243         (79,750)     (10,504,062)      (7,076,268)

  Recapitalization for reverse merger       5,969,115       5,969         (12,262)                                           (6,293)

   Shares issued for services               1,140,600       1,141         112,919                                           114,060

   Amorization of deferred compensation                                                    79,750                            79,750

   Net loss                                                                                             (8,197,244)      (8,197,244)
                                          ------------ -----------  --------------  --------------  --------------- ----------------

 BALANCE DECEMBER 31, 2003                  9,410,850   $   9,411    $  3,605,900    $          -    $ (18,701,306)  $  (15,085,995)
                                          ============ ===========  ==============  ==============  =============== ================
</TABLE>





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

                                       22
<PAGE>



LITFUNDING CORP.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 2003 AND 2002



<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:                                           2003              2002
<S>                                                                              <C>               <C>
  Net (loss) income                                                      $    (8,197,244)   $   (7,443,002)
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
  Depreciation and amortization                                                   31,612            11,467
  Reserve for unsuccesfful resolution of lawsuits                                790,529         2,136,487
   Reserve for bad debts                                                        (134,567)          617,872
   Loss on disposal of asset                                                      10,733                 -
  Deferred compensation                                                           79,750            39,000
  Services and settlement paid by issuance of common stock                       114,060           300,000
  Changes in assets and liabilities:
    Trade and other accounts receivable                                          (39,462)       (1,148,287)
     Other asets                                                                  25,039                 -
    Other receivable                                                                   -            36,226
    Contingent advances                                                        1,493,900        (9,054,687)
    Prepaid commissions on contingent advances                                   864,196          (163,608)
    Deposits                                                                           -           (14,955)
    Accounts payable and accrued expenses                                        652,510            (2,271)
    Interest payable                                                           3,905,048         1,632,738
                                                                         ----------------  ----------------
          Net cash (used in) provided by operating activities                   (403,896)      (13,053,020)
                                                                         ----------------  ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash paid in business acquisition                                              (25,000)                -
  Purchases of property and equipment                                            (10,579)          (57,059)
                                                                         ----------------  ----------------
          Net cash (used in) provided by investing activities                    (35,579)          (57,059)
                                                                         ----------------  ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from investor participation                                           154,385        11,977,890
  Issuance (purchase) of redeemable common stock                                       -        (1,000,000)
  Proceeds from issuance of common stock                                               -           434,322
  Investor Deposits                                                                    -          (823,750)
  Principal payments on capital lease obligations                                 (7,949)                -
  Debenture                                                                       70,000           130,000
  Loans payable, officer/shareholder                                                   -            (2,700)
  Shares issued on excersise options                                                   -            20,000
                                                                         ----------------  ----------------
          Net cash  provided by (used in) financing activities                   216,436        10,735,762
                                                                         ----------------  ----------------

INCREASE (DECREASE) IN CASH                                                     (223,039)       (2,374,317)

CASH, BEGINNING OF YEAR                                                          274,715         2,649,032
                                                                         ----------------  ----------------

CASH, END OF YEAR                                                        $        51,676    $      274,715
                                                                         ================  ================


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         Interest paid                                                   $       152,078    $    1,304,663
                                                                         ================  ================

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
       Common stock options issued for services                          $             -    $            -
                                                                         ==================================
       Common stock issued for compensation                              $             -    $      300,000
                                                                         ==================================
      Accrued interest added to bankruptcy liabilities                   $       252,625    $            -
                                                                         ==================================
</TABLE>






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

                                       23
<PAGE>




LITFUNDING CORP.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
         YEARS ENDED DECEMBER 31, 2003 AND 2002



SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
   <S>                                                                             <C>            <C>
   Net book value of assets acquired in issuance of common for reverse
     merger                                                                   $     (6,293)   $        -
                                                                              ============    ===========

   Equipment acquired under capitalized leases                                $     33,197    $        -
                                                                              ============    ===========
</TABLE>
















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

                                       24
<PAGE>







1.       ORGANIZATION AND BASIS OF PRESENTATION

LitFunding Corp. ("The Company") was incorporated in the state of Nevada. The
Company serves as a holding company for its wholly owned subsidiary, California
LitFunding ("California LitFunding") (together the Company and California
LitFunding are referred to herein as the "LitFunding Companies"), which is the
entity for which all operations are conducted. It owns substantially all of
operating assets, it employs all of the personnel, and it pays the obligations
of both corporations.

California Litfunding is the successor-in-interest by merger to the "LitFunding
Corp., a California corporation ("Litfunding I"). This merger resulted in the
two entity corporate structure that now exists. LitFunding I began investing in
litigation recoveries in 2000, by raising capital and advancing this capital to
various law firms pursuant to "Settlement Agreements". These Settlement
Agreements provide that the funds advanced shall be repaid, plus a fee, when the
lawsuits referenced in the agreement ultimately settle. The exact amount of the
fee payable on the funds advanced depends upon the length of time the fund are
outstanding, up to a fixed limit. Pursuant to the terms of the Settlement
Agreements, California Litfunding's contractual right to payment (as successor
to LitFunding I) is limited to the funds ultimately paid to the law firm from
the specified lawsuit, or lawsuits, in which the funds are invested or expended.

 The merger referenced above was implemented in January of 2003. To implement
this merger, the Company formed a wholly owned subsidiary (a Nevada corporation)
called RP Acquisition Corp. The Company then acquired all of the common stock of
LitFunding I. This merger was finalized on January 23, 2004, through the filing
of the Articles of Merger for RP Acquisition Corp. Upon this filing, LitFunding
I was merged into RP Acquisition Corp, which assumed title to all of its assets
and liabilities. RP Acquisition Corp. then changed its name to California
Litfunding. California Litfunding, is now a wholly owned subsidiary of the
Company, which serves as the publicly listed holding company.

As a result of the merger transaction with the Company, the former LitFunding I
stockholders obtained control of the Company's voting stock. For financial
accounting purposes, the acquisition was a reverse acquisition of the Company by
California LitFunding, under the purchase method of accounting, and was treated
as a recapitalization with California LitFunding as the acquirer. Accordingly,
the historical financial statements have been restated after giving effect to
the January 23, 2003, acquisition of the Company. The financial statements have
been prepared to give retroactive effect to January 1, 2002, of the reverse
acquisition completed on January 23, 2003, and represent the operations of
California LitFunding. Consistent with reverse acquisition accounting: (i) all
of California LitFunding's assets, liabilities, and accumulated deficit, are
reflected at their combined historical cost (as the accounting acquirer) and
(ii) the preexisting outstanding shares of the Company (the accounting acquiree)
are reflected at their net asset value as if issued on January 23, 2003.


                                       25
<PAGE>

On April 2, 2003 certain individuals and entities filed an involuntary
bankruptcy petition against the Company in the United States Bankruptcy Court,
Central District of California. After numerous legal proceedings, in November
2003, the Company stipulated to the entry of an order for relief, thereby
placing the Company into a Chapter 11 proceeding. In January 2004, the Company's
wholly owned operating subsidiary, California LitFunding, filed a voluntary
Chapter 11 bankruptcy petition. In February of 2004, an order was entered
substantively consolidating the Company's Chapter 11 estate with the Chapter 11
estate of California LitFunding. However, this order did not effectuate a merger
between these two corporate entities. The Company anticipates confirmation of
its plan of reorganization by the bankruptcy court in the second calendar
quarter of 2004 (see Note 3).

The Company incurred material net losses for the year ended December 31, 2003
and liabilities exceed assets by $15,085,995 at December 31, 2003. As discussed
in Note 3, the Company has entered into a Chapter 11 Plan of Reorganization
under the United States Bankruptcy Code. The ability of the Company to continue
as a going concern is dependent upon successful confirmation and operation under
the bankruptcy plan, obtaining additional capital and financing, and generating
positive cash flow from operations. The Company intends to seek additional
capital either through debt or equity offerings and believes that increased
volume and reduction in its lead time to finance and collect on funded cases
will ultimately lead to profitability and positive cash flows. The financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less. At times cash deposits may exceed government insured limits. At
December 31, 2003, cash deposits did not exceeded those insured limits.

Principles of consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, California LitFunding
and E.Evolution Expeditions. All significant intercompany accounts and
transactions are eliminated.

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is recorded on a straight-line basis over a period of the shorter
of the applicable lease term or the estimated useful lives of the assets ranging
from 3 to 5 years. Depreciation expense for the years ended December 31, 2003
and 2002 was $ 31,612 and $11,467, respectively.


                                       26
<PAGE>

Revenue recognition -The Company recognizes revenues earned in relation to the
fees charges on the contingent advances upon successful resolution of the funded
lawsuit. In accordance with the guidelines of Staff Accounting Bulletin (SAB)
101 and Statement of Financial Accounting Concepts (SFAC) No. 5, upon successful
resolution of the lawsuit, including appeals, the fees become realizable and
earned. At this time the fee is determinable and the collection ensured.

Income taxes - The Company provides for income taxes based on the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which, among other things, requires that recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date of
financial statements. The company is a cash basis tax payer.

Financial Instruments - Financial instruments consist primarily of cash,
accounts receivable, contingent advances, and obligations under accounts
payable, accrued expenses, debentures, capital lease obligations and investor
participation obligations. The carrying amounts of cash, accounts receivable,
accounts payable and accrued expenses approximate fair value because of the
short maturity of those instruments. The carrying value of the Company's
contingent advances approximate fair value because the Company provides
allowances for any estimated uncollectible amounts (See Note 4). The carrying
value of debentures approximate fair value because they contain market value
interest rates and have specified repayment terms. The investor participation
obligations are carried at the expected repayment amounts as determined by the
individual contracts and most recently at the expected amounts allowed through
the bankruptcy proceedings. Obligations under capital leases approximate fair
value because the original balances approximated the fair value of the
underlying equipment at the time the obligations were incurred. The Company has
applied certain assumptions in estimating these fair values. The use of
different assumptions or methodologies may have a material effect on the
estimates of fair values.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates made in connection with the preparation of the accompanying financial
statements include the carrying value of accounts and contingent advances
receivable,


                                       27
<PAGE>

Stock-Based Compensation - Statements of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, ("SFAS 123") established accounting and
disclosure requirements using a fair-value based method of accounting for
stock-based employee compensation. In accordance with SFAS 123, the Company has
elected to continue accounting for stock based compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and has opted for the disclosure
provisions of SFAS N.123

Impairment of long-lived assets is assessed by the Company whenever there is an
indication that the carrying amount of the asset may not be recoverable.
Recoverability of these assets is determined by comparing the forecasted
undiscounted cash flows generated by those assets to the assets' net carrying
value. The amount of impairment loss, if any, is measured as the difference
between the net book value of the assets and the estimated fair value of the
related assets.

Net Loss Per Share: Net loss per share is calculated using the weighted average
number of shares of common stock outstanding during the year. The Company has
adopted the provisions of SFAS No. 128, Earnings Per Share.

Business Cycle: Because the nature of the Company's operations is such that the
investment in contingent advances and ultimate resolution of cases and
completion of the earnings process is generally longer than one year, an
unclassified balance sheet is presented.

Recently Issued Accounting Pronouncements: In May 2003, the FASB issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. SFAS No.
150 requires the classification as a liability of any financial instruments with
a mandatory redemption feature, an obligation to repurchase equity shares, or a
conditional obligation based on the issuance of a variable number of its equity
shares. The Company does not have any financial instruments with a mandatory
redemption feature. The Company believes the adoption of SFAS No. 150 will not
have a material effect on the Company's financial statements.


                                       28
<PAGE>

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 clarifies the
requirements for a guarantor's accounting for and disclosure of certain
guarantees issued and outstanding. The initial recognition and initial
measurement provisions of FIN 45 are applicable to guarantees issued or modified
after December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements for periods ending after December 15, 2002. The adoption of
FIN 45 did not have a significant impact on the Company's financial statements.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities" (FIN 46). FIN No. 46 states that companies that have exposure to the
economic risks and potential rewards from another entity's assets and activities
have a controlling financial interest in a variable interest entity and should
consolidate the entity, despite the absence of clear control through a voting
equity interest. The consolidation requirements apply to all variable interest
entities created after January 31, 2003. For variable interest entities that
existed prior to February 1, 2003, the consolidation requirements are effective
for annual or interim periods beginning after June 15, 2003. Disclosure of
significant variable interest entities is required in all financial statements
issued after January 31, 2003, regardless of when the variable interest was
created. The Company is presently reviewing arrangements to determine if any
variable interest entities exist but does not anticipate the adoption of FIN 46
will have a significant impact on the Company's financial statements.


3.       BANKRUPTCY PETITION AND REORGANIZATION

    On April 2, 2003, certain creditors filed an involuntary bankruptcy petition
under Chapter 7 of the United States Bankruptcy Code against the Company. In the
Petition, the Petitioning Creditors alleged that the Company was generally not
paying its debts as they became due. The Company disputed this allegation. For
approximately eleven months the Company and the Petitioning Creditors engaged in
litigation regarding the merits of the involuntary petition, and the Petitioning
Creditors rights under disputed contracts.

    Pursuant to the terms of a stipulation with the Petitioning Creditors, the
Company entered Chapter 11 effective November 19, 2003. The costs of litigating
the merits of the Involuntary Petition, and the financial impact of the pending
involuntary, so materially damaged both the Company and California LitFunding
that it ultimately became necessary for both companies to enter into Chapter 11.
Accordingly, California LitFunding entered into a Chapter 11 proceeding on
January 26, 2004.

     In February of 2004, the litigation relating to the involuntary petition
was settled. The settlement reached by and among the Company and the petitioning
creditors has been incorporated into a reorganization plan scheduled for a
confirmation hearing on May 26, 2004.


                                       29
<PAGE>

    California Litfunding, as the operating entity, holds title to substantially
all of the assets of the LitFunding Companies. The core assets within California
Litfunding, and those with most of the value, are the Settlement Agreements. A
total of approximately $18.6 million dollars was invested through the Settlement
Agreements. Of this total, approximately $7.0 million dollars in principal has
been recovered, $3.2 million dollars in "fees" have been paid, and $1.6 million
dollars in losses have been suffered, leaving a principal balance owing of
approximately $12.4 million dollars.

    Based upon the current status of the underlying lawsuits, the Company
projects that between $30.0 million and $36.0 million dollars will be collected
over the next three years on the lawsuits subject to Settlement Agreements

The Company's primary liabilities are summarized in the following paragraphs:

A.               Administrative and Priority Claims. The claims within this
                 class total approximately $200,000 through April 2004. Most of
                 this amount represents the fees and costs payable to the
                 LitFunding Companies'general insolvency counsel, Winthrop
                 Couchot, P.C. The balance represents sums owed to accountants,
                 and approximately $10,000 in priority wages owed to two
                 officers of the LitFunding Companies;

B.               Gap Claims. During the period between the filing of the
                 involuntary petition and the date on which the Company
                 stipulated to the entry of an order for relief, certain claims
                 accrued. Substantially all of these claims accrued in favor of
                 two law firms that were defending the Company against the
                 involuntary filing. The LitFunding Companies have reached an
                 agreement with these claimants. In summary, 40% of their claims
                 will be paid on or before June 15, 2004 and the balance of
                 their claims will be paid over the next twelve months;

C.               Debenture Claims. In calendar years 2002 and 2003 California
                 Litfunding issued debentures to seven individuals, creating
                 approximately two hundred thousand dollars ($200,000) in debt
                 obligations. These claims are unsecured and they are
                 undisputed.

D.               Unsecured Claims Other Than Debenture Claims and IEP Claims.
                 The Debtors have approximately $500,000 in allowed unsecured
                 claims.

E.               IEP Claims. Pursuant to the Settlement Agreement entered into
                 by and between The Company and the IEP petitioning creditors,
                 each and every claim held by the IEP petitioning creditors has
                 been fixed in the Plan. The totality of all claims held by the
                 IEP petitioning creditors has been incorporated into the Plan
                 Note. The Plan Note will have an opening balance of
                 $26,111,763.00 as of May 1, 2004.

F.               Interest Holders. Interest holders are the parties who hold
                 ownership interest (i.e., equity interest) in The Company. The
                 Plan creates two classes of interests. Class 7, which is
                 comprised of the Company, as the holder of all of the common
                 stock of California Litfunding, and Class 8, which is comprised
                 of all of the holders of common stock interests in the Company.
                 These classes are not impaired under the terms of the Plan.


                                       30
<PAGE>

         The Plan presented for confirmation incorporates both a business plan,
and a legal framework for the payment of claims. The business plan sets forth
how the Company intends to generate the funds necessary to meet the monetary
obligations fixed in the Plan. The legal framework details what each class of
creditors will receive under the terms of the Plan.

         The business plan incorporated into the Plan is designed to accomplish
two core objectives. The first core objective is to maximize the funds collected
to be collected. The second core objective is to essentially restart The
LitFunding Companies' business model by raising and investing additional capital
in new lawsuits.

The Company intends to repay all obligations in full. Claims are impaired as
that termed is used in the Bankruptcy Code because obligations will be paid out
over specified long term periods. However, for accounting purposes, the Company
does not believe any of the obligations are compromised at December 31, 2003,
based on the expected amount of allowed claims.

4.       ACCOUNTS RECEIVABLE AND CONTINGENT ADVANCES

Accounts receivable represents unpaid amounts due for the return on contingent
advances and fees earned on cases in which there have been positive resolutions.
Allowances for bad debts amounted to $488,075 as of December 31, 2003.

The Company enters into agreements with lawyers and law firms whereby the
Company underwrites and funds litigation costs on selected cases. Generally, the
Company will be repaid those amounts plus negotiated fees when a case is settled
awards are received by the plaintiffs. These agreements are non-recourse but are
secured by a lien against any awards in the case. Fees are generally based on
the length of time the advances are outstanding. If the fee is less than the
award or settlement, the fees are reduced to the amount of the recovery.

Management estimates the net realizable value of contingent advances by
periodically reviewing the progress of the cases with the attorneys trying them
and past experience with similar cases. Management believes that the Company has
historically achieved a success rate of approximately 85% on cases that it has
funded. Management monitors all case and provides an allowance if it believes
that any advances have been impaired. At December 31, 2003, there were
contingent advances outstanding of $12,632,350 and a corresponding impairment
allowance of $2,909,467.



                                       31
<PAGE>

5.       INVESTOR PARTICIPATION OBLIGATIONS

The Company raised capital to enable it to engage in the practice of funding the
contingent advances by entering into so called IEP agreements. These are
considered to be investment/equity participation agreements the nature of which
has been redefined and fixed as part of plan of reorganization and the totality
of all claims held by the IEP petitioning creditors has been incorporated into
the Plan Note. The Plan Note will have an opening balance of $26,111,763.00 as
of May 1, 2004 and as of May 1, 2004 include an approximate $2,000,000 from the
cancelled sale of stock and a predetermined retroactive return. These IEP's
accrue interest at 20% per annum. Under the anticipated bankruptcy plan these
obligations are to be repaid to the extent the Company successfully collects
funds from accounts receivable and contingent advances. There is no specific
schedule of repayment but the Company anticipates collections to be adequate to
fully repay the IEP Note.

Costs associated with obtaining the capital, consisting mainly of commissions
paid, are included as a reduction of the investor participations balance and are
amortized over one year. Amortization for the years ended December 31, 2003 and
2002 was $154,385 and $786,176 respectively. A summary of investor participation
is as follows:


                                       32
<PAGE>


                              December 31, 2003         December 31, 2002
                              -----------------         -----------------

Investor participation        $       18,814,550       $       18,814,550
Commissions                                - 0-                  (154,385)
                              ------------------       -------------------
                              $       18,814,550       $       18,660,165
                              ==================       ===================


6.       DEBENTURES

During the years ended December 31, 2003 and 2002, the Company issued 5-year 9%
convertible debentures amounting to $200,000, due January 1, 2007. Interest is
due semi-annually on the first day of June and December of each year, commencing
June 1, 2003 until fully paid. As part of the plan of reorganization, these
debentures will have an amended maturity to June 15, 2008.

The registered holders of the debentures have the right, after one year prior to
maturity, to convert the principal at the original conversion price of $10 for
one Common share or at the adjusted conversion price. If and whenever on or
after the date of this debenture, the Company issues or sells any share of
common stock for a consideration per share less than the initial conversion
rate, then upon such issue or sale, the initial conversion rate shall be reduced
to the lowest net price per share at which such share of common stock have been
issued. The debentures are subordinated to all the senior indebtedness,
including debts under Equity Participation Agreement.


7.       STOCKHOLDERS' DEFICIT

As discussed in Note1, the Company entered into a merger agreement in January
2003, whereby 7,592,250 shares of its common stock were issued in exchange for
all the issued and outstanding shares of the common stock of California
LitFunding. The acquisition was a reverse acquisition of the Company by
California LitFunding, under the purchase method of accounting, and was treated
as a recapitalization with California LitFunding as the acquirer. Accordingly,
the historical financial statements have been restated after giving effect to
the January 23, 2003, acquisition of the Company.

During the year ended December 31, 2003, the Company granted 1,140,600 shares of
common stock to officers and employees as compensation for services rendered.
The value of these shares was determined by the quoted trading price of the
Company's common stock.


                                       33
<PAGE>

As discussed in Note 8, during May 2002, the Company had a private placement
equity sale. Due to disclosures contained in the document, certain shareholders
alleged error in judgment and breach of fiduciary duty on the part of one of the
officer-shareholders, who subsequently resigned. The Company rescinded all
shares that had been issued under the private placement, and returned all cash
collected under the equity sale.

As a condition of the Settlement and Mutual Release Agreement, which the Company
and several shareholders entered into with the officer-stockholder, the
officer-stockholder returned 2,700,000 (3,964,157 shares when consideration is
given to the exchange conducted as part of the reverse merger), of his founding
shares during the year ended December 31, 2002,. These shares were valued at
their original issuance cost of $.001 in the accompanying financial statements,
as the transaction in effect was a revocation of the original issuance.

                                      31
<PAGE>


8.       INCOME TAXES

The Company recognizes deferred income taxes for the differences between
financial accounting and tax bases of assets and liabilities. The Company has
elected to account for its income and expenses on a cash basis for income tax
purposes. Income taxes for the years ended December 31, 2003 and 2002 consisted
of the following:

                                              2003             2002
                                         -------------- -----------------
Current tax (benefit) provision          $    (816,290) $     (2,526,000)
Deferred tax (benefit) provision               816,290         2,526,000
                                         -------------- -----------------
Total income tax provision               $          -0- $             -0-
                                         ============== =================

Net deferred income tax assets of $6,393,000 are fully offset by an equal
valuation allowance. The valuation allowance was increased by $3,290,000 and
$1,878,000 in the years ended December 31, 2003 and 2002 respectively. The net
deferred income tax asset at December 31, 2003 is comprised of:

      Allowance for losses on advances and accounts receivable$      987,000
      Differences in liabilities related to accounts payable
      and accruals                                                 3,136,000
      Book/tax differences in stock based compensation                76,000
      Net operating loss carryforwards                             2,194,000
                                                              ---------------
      Deferred income tax asset                                    6,393,000
          Less: Valuation allowance                               (6,393,000)
                                                              ---------------
          Total deferred income tax asset                                 -0-
      Deferred income tax liability                                       -0-
                                                              ---------------
      Net deferred income tax asset                           $           -0-
                                                              ===============

Federal and state net operating loss carryforwards of $5,485,000 expire from
2020 through 2023. Due to the change in control of the Company discussed in Note
1, future utilization of the net operating losses may be restricted.



                                       32
<PAGE>


The differences between the statutory and effective tax rates are as follows
for the year ended December 31, 2003:
                                                            2003
        Federal statutory rates                      $  (2,787,000)       (34)%
        State income taxes                                (492,000)        (6)%
        Valuation allowance for operating loss carry
        forwards                                         3,290,000          40%
        Other                                              (11,000)          -%
                                                     -------------- -----------
        Effective rate                               $          -0-          0%
                                                     ============== ===========


9. COMMITMENTS AND CONTINGENCIES

      Capital Lease:

The Company leases its office equipment under a capital lease as shown below.

The following is an analysis of leased property under capital leases by major
classes:

Machinery and Equipment                             $33,197
Less: Accumlated Depreciation                        (5,652)

                                                    --------
                                                    $27,545
                                                    ========

The following is a schedule by ten years of future minimum lease payments under
capital leases together with the present value of the minimum lease payments
as of December 31, 2003:

Year Ending December 31:
2004                                                $  6,654
2005                                                   6,654
2006                                                   6,654
2007                                                   6,654
2008                                                     555
                                                    --------
Total Minimum Lease Payments                          27,171
  Less Amount REpresenting Interest                   (6,872)
Present Value of Minimum Lease Payments             $ 20,299
                                                    ========

Operating Lease:

The Company also is obligated under an operating premises lease through January
14, 2006. However, the company has the right and intent on rescinding the
premises lease under bankruptcy proceedings of Chapter 11 of the Federal
Bankruptcy Code and moving their offices to Las Vegas, Nevada by the end of
2004. Rent expense under the premises leases was $ 143,088 and $61,115 for the
years ended December 31, 2003 and 2002. During 2003 the Company subleased part
of it premises for $30,000.

                                       33
<PAGE>

Certain of the Company's officers have personally guaranteed the operating
lease.

Contingencies:

The Company is defendant in several matters in litigation, many of which are in
the normal course of business, including litigation for refunds of funds
invested. The Company believes these suits are without merit and intends to
defend these litigations in court of law.

The Company is involved in a suit for breach of contract, fraud, conspiracy and
defamation. The claimants allege that there was a finder's fee agreement between
them and the founding officers/shareholders for the Company. The Company's
position is that there was a negotiated agreement with the claimants. The
claimants allege damages of $16 million. The hearing is scheduled for May 26,
2004.

The Company believes that all alleged claims must be settled through the
bankruptcy court. Any disputed claims will be settled prior to plan
confirmation.


10.     NET LOSS PER SHARE

Net loss per share is calculated using the weighted average number of shares of
common stock outstanding during the year. Warrants and options to purchase
2,400,500 common shares were not considered in the calculation for diluted
earnings per share for the years ended December 31, 2003, because the effect of
their inclusion would be antidilutive.

                                          -------------- ------------- ---------
                                                                         Per
                                          Income (Loss)     Shares      share
                                          -------------- ------------- ---------
        Net (Loss) Income                 $(8,197,244)
        Preferred stock dividends              (-0-)

        Basic Earnings Per Share

        Loss available to common
        stockholders                      $(8,197,244)    8,914,770    $  (0.92)

        Effect of dilutive securities          N/A


        Diluted Earnings Per Share             N/A        8,914,770    $  (0.92)

11.     CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at banks in California. Accounts are insured
by the Federal Deposit Insurance Corporation up to $100,000. At times, the
Company's cash balances may exceed insured limits. However, December 31, 2003,
none of the Company's deposits exceeded insured limits.


                                       34
<PAGE>


Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily contingent advances and trade accounts receivable. The
trade accounts receivable are due primarily from customers concentrated in
California.

The Company's contingent advances are generally due from clients when the
litigating case in question is settled favorably. Substantially all cases are
being tried by lawyers in the state of California. Monies invested by the
Company plus fees become part of the Companies accounts receivable and are due
at that time less any settlement discount. The contingent advances balance at
December 31, 2003 is comprised of numerous debtors. However, one debtor
represents approximately 50% of the total balance at December 31, 2003. No other
single note or debtor comprises greater than 10% of the total balance at
December 31, 2003.

2.      STOCK BASED COMPENSATION

The Company issues stock options from time to time to executives, key employees
and members of the Board of Directors. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," and continues to account for
stock based compensation using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Accordingly, no compensation cost has been recognized for the stock
options granted to employees. Had compensation cost for the Company's stock
options been determined based on the fair value at the grant date for awards in
2003 and 2002, consistent with the provisions of SFAS No. 123, the Company's net
(income) loss and loss per share would have been increased to the pro forma
amounts indicated below:

                                                  2003             2002
                                                  ----             ----
Net income (loss) - as reported                 $(8,197,244)     $(7,443,002)
Net income (loss) - pro forma                   $(8,212,261)     $(7,426,002)
Loss per share - as reported                         $(0.92)          $(0.98)
Loss per share - pro forma                           $(0.92)          $(0.98)

The fair value of each option grant is estimated on the date of grant using the
minimum value method. The minimum value method was used because the Company's
stock did not trade during the year ended December 31, 2003. The following
assumptions were used in imputing value for options granted in year ended
December 31, 2003:
                                  2003
                                  ----
Dividend yield                    None
Volatility                         N/A
Risk free interest rate          3.00%
Expected asset life            3 years
Fair value of stock            $  0.10


                                       35
<PAGE>


The Company does not maintain a formal stock option plan. The Company granted
1,477,500 options to certain key employees during the year ended December 31,
2003. These options all vest immediately. The options granted in the year ended
December 31, 2003, are exercisable at $0.01 to $1.00 per share. The options
expire three to four years from date of grant. The summary of activity for the
Company's stock options is presented below:
                                                                       Weighted
                                                                       Average
                                                                       Exercise
                                                         2003           Price
                                                      ----------     -----------
    Options outstanding at beginning of year              47,000     $      6.33
    Granted                                            1,477,500     $      0.36
    Exercised                                             - 0 -
    Terminated/Expired                                    - 0 -
    Options outstanding at end of year                 1,524,500     $      0.54
    Options exercisable at end of year                 1,524,500     $      0.54
    Options available for grant at end of year               N/A             N/A

    Price per share of options outstanding           $0.01-$1.00

    Weighted average remaining contractual lives
                                                      2.83 years

    Weighted Average fair value of options granted
    during the year                                        $0.01


13. SUBSEQUENT EVENTS

            As described above, LitFunding Corp was placed into a Protective
Chapter 11 proceeding effective November 19, 2003. The costs of litigating the
merits of the involuntary Petition, and the financial impact of the pending
involuntary proceeding, so damaged both the LitFunding Corp and California
LitFunding that it ultimately became necessary for both companies to enter into
Chapter 11. Accordingly, California LitFunding entered into a Chapter 11
proceeding on January 26, 2004.

           In February of 2004, this litigation was settled. The settlement
reached by and among the Company and the petitioning creditors has been
incorporated into a reorganization plan scheduled for a confirmation hearing on
May 26, 2004. Pursuant to the Settlement Agreement entered into by and between
the Company and the IEP petitioning creditors, each and every claim held by the
IEP petitioning creditors has been fixed in the Plan. The totality of all claims
held by the IEP petitioning creditors has been incorporated into the Plan Note.
The Plan Note will have an opening balance of $26,111,763.00 as of May 1, 2004.



                                       36
<PAGE>



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

   None

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

    The executive officers and directors of LitFunding Corp as of December 31,
2003 are as follows:


  NAME                   AGE            POSITION
  ----                   ---            --------

  Morton Reed            71             Director, President, CEO

  John Holt Smith        61             Director
  Stanley Weiner         62             Director, VP Finance
  David Cohen            46             CFO, Treasurer and acting Secretary
  Michael Marcelli       40             Director, General counsel (Resigned
                                        March 1, 2004)

Morton Reed, Director practiced for twenty years as psychologist in the area of
forensics, both evaluating offenders and testifying in court. From 1970 to 1982,
Morton Reed founded and was president & Chairman of the Board of AAlpha Mortgage
and Investment co., (AAlpha") a major secondary and tertiary (hard money) lender
in California. TDL Funding purchased AAlpha in 1982 at which time AAlpha had
funded in excess of one hundred million dollars in deeds of trust.

Prior to creation of AAlpha, from 1962 until 1971, Morton Reed was the president
of Cathay Studios, a national chain of portrait studios. He left Cathay to
become a founding partner in AAlpha. Following the sale of AAlpha, Morton Reed
took over as president of Orient Limited of Nevada, a people-moving company that
brought tourists into Las Vegas for gambling and attendance at land sales
presentations. At one time, Orient Limited of Nevada was the single largest
buyer of rooms in the city of Las Vegas.


                                       37
<PAGE>


     Morton Reed, whose early training was in advertising as copywriter, has
also written fifteen screenplays and three novels (including a best seller). In
1985, he produced the film Space Rage, the first film production of Vestron
Films, and continued to work in the motion picture business as an independent
writer/producer until 1995. In 1995, Morton Reed accepted a contract from Live
Entertainment to produce television movies with his partner, Robert Peters, the
former Chief Financial Officer of New World Pictures. In 1997, Morton Reed
joined Magnolia Studios as vice-president of marketing. In 1998, when Magnolia
was purchased by Millennium Sound, Morton Reed became Millennium's interim
President and Chief Executive Officer.

In December 1999, Morton Reed joined Case Financial, Inc., as consultant to
create a marketing program in the new area of litigation funding. He developed
their sales program and remained there until October 2000, when he left to found
LitFunding Corp.

Dr. Reed did his undergraduate work at U.C.L.A and later received his M.A at
Antioch College and doctorate at California Graduate Institute in 1975.


         John Holt Smith, Director is a partner of the law firm Kelly Lytton &
Vann LLP. Mr. Smith is engaged in the practice of law representing
broker-dealers, individuals and entities raising capital, as well as preparing
private placements and subsequent public offerings in a multitude of industries,
including medical services and supply, film development and production,
restaurant and food service, high technology and internet services. Formerly a
partner in the Fort Worth, Texas firm of McDonald, Sanders, Ginsburg, Phillips,
Maddox & Newkirk, Mr. Smith handled significant loan, corporate, securities and
real estate transactions. He later served as Vice President of the United States
Trust Company of New York and in that capacity opened the company's Beverly
Hills office. Mr. Smith subsequently returned to the practice of law ultimately
to head the securities department of the Los Angeles firm Bushkin, Gaims, Gaines
& Jonas where he represented entertainment industry clients. Mr. Smith holds two
degrees from Vanderbilt University (B.A. 1963, LL.B. 1966). Mr. Smith was Law
Clerk to the Honorable Weldon White, Supreme Court of Tennessee, 1966.


Mr. Stanley B. Weiner, Director has more than 35 years experience creating and
running business. Mr. Weiner was the founding officer of Gemini Financial
Corporation, a NASD Broker/Dealer from 1970 through 1975, President of A.P.A.
Real Estate Syndication Company from 1975 through 1978, Managing Partner of
Agri-World Partnership from 1978 through 1983, an agricultural project
syndication company with offices throughout Europe and the Middle East. Mr.
Weiner was Founding Officer/President of Regent Properties from 1985 through
1990, and Chief Executive Officer of Wise Industries from 1990 through 1993, a
company specializing in pollution control devices. In 1978, Mr. Weiner founded
Western Pacific Investment Corporation, which syndicated thousands of apartment
units, office buildings, shopping centers and agricultural properties in
addition to packaging many tax-sheltered investments. As a result of the
foregoing activities, Mr. Weiner has extensive experience in marketing,
acquiring, financing and developing commercial and agricultural property,
negotiating agreements and packaging transactions. Mr. Weiner received his
Bachelor of Arts degrees in both Psychology and Economics from California State
University at Long Beach. He also did graduate work in both fields at UCLA. Mr.
Weiner has in the past held a National Association of Securities Dealers
Principals license and is a licensed Real Estate Broker.



                                       38
<PAGE>


   Each of LitFunding Corp's directors is elected at the annual meeting of
stockholders and serves until the next annual meeting or until his successor has
been elected and qualified. Holders of common stock can elect a number of
members of the board of directors proportionate to the percentage of shares held
by each of them constitute of the total outstanding shares. Vacancies in the
board of directors are filled by a majority vote of the remaining members of the
board of directors who were elected by the same class of shareholders.
Currently, there are no standing compensation arrangements for board of director
members. Executive officers of LitFunding Corp's are elected by and serve at the
discretion of the board of directors.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

   Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors, and persons who own more than 10% of the registered class
of the Company's equity securities to file reports of ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10%
stockholders are required by the regulations of the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) forms they
file.

   Based solely on a review of the Forms 3 and 4 furnished to the Company, the
Company believes that all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with.


   Form 5 is not required to be filed if there are not previously unreported
transactions or holdings to report. Nevertheless, the Company is required to
disclose the name of directors, executive officers and 10% shareholders who did
not file a Form 5, unless the Company has obtained a written statement that no
filing is due. The Company has been advised by those required to file Form 5
that no filings were due.



                                       39
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

   The following table furnishes compensation information for the year ended
December 31, 2003, for the chief executive officer; General Counsel and CFO. No
other executive officers earned more than $100,000 during the year ended
December 31, 2003. During fiscal 2003 officers received, and as of March 31,
2002, did hold any stock options or SARs which have been granted in connection
with their service to the Company in any capacity.

                           SUMMARY COMPENSATION TABLE

(a) Annual Compensation.

                                      ANNUAL COMPENSATION
                         -----------------------------------------
NAME AND                      FISCAL OTHER ANNUAL
PRINCIPAL POSITION         YEAR       SALARY     BONUS           COMPENSATION
----------------------  ---------  ------------ ------

Morton Reed                2003    $    252,000             XXXXXXXXXXXXX Stock
John Holt Smith            2003             -0-
Stanley Weiner             2003             -0-
Michael Marcelli           2003    $    100,000
David Cohen                2003    $    125,000

Note: Dr. Reed voluntary stopped taking salary in mid 2003 to assist the
companies in the financing of the ongoing litigation.

(b)      Option/Stock Appreciation Rights. Stock options were granted during
         2001 or free standing SARs to executive offices of the Company.

XXXXXXXXXXXX

(c)      Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Value
         Table. There was no exercise during 2001 of stock options or SARs.



                                       40
<PAGE>


(d)      Long Term Incentive Plan ("LTIP") Awards Table. The Company did not
         make any long term incentive plan awards to any executive officer in
         2003. XXXXXXXXXXXX

(e)      Compensation of Directors. All the directors of the Companies received
         cash compensation for their services as directors during 2003.

(f)      Employment Contracts. The Company has employment contracts with all of
         its executives and directors with the exception of Holt Smith



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The following table shows beneficial ownership of capital stock of the
Company at March 31, 2002, for the directors and officers of the Company, and
for each beneficial owner of 5% or more of either class of the Company's common
stock.


                             SHARES OF COMMON STOCK
                       ----------------------------------
NAME                     NUMBER                % OF CLASS
----                   ----------              ----------

Morton Reed             4,970,000                  52.8%
Stanley Tomchin         1,032,000                  11.0%
Stanley Weiner            600,000                   6.4%



   (1) The address for the officers and directors is the corporate office of the
Company located at 5757 Wilshire Blvd, Penthouse 10 Los Angeles, Ca 90036

   (2) There are no shares of preferred stock outstanding.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


                                       41
<PAGE>


None

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K


(A) EXHIBIT LIST


EXHIBIT NUMBER                     DESCRIPTION
--------------                     -----------

23.1     Consent of Kabani & Company CPA's



                                   SIGNATURES

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

Date:  May 21, 2004
                                  LitFunding Corp (Debtor in Possession)


                                  By:  /s/ Morton Reed
                                      -----------------------------------
                                      Morton Reed
                                      President and Chairman of the Board



                                       42
<PAGE>


   In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

/s/ Morton Reed                 May 21st 2004
---------------------------
Morton Reed,
President and Chairman of the Board

/s/ David Cohen                 May 21st 2004
---------------------------
David Cohen
Chief Financial officer and Secretary