UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

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

                 For the quarterly period ended August 31, 2007


                          JACOBS FINANCIAL GROUP, INC.
                       ---------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                      <C>                                   <C>
======================================== ===================================== =====================================
               DELAWARE                                0-21210                              84-0922335
               --------                                -------                              ----------
---------------------------------------- ------------------------------------- -------------------------------------
    (State or other jurisdiction of            (Commission File Number)         (IRS Employer Identification No.)
            incorporation)
======================================== ===================================== =====================================
</TABLE>


               300 SUMMERS STREET, SUITE 970, CHARLESTON WV 25301
                -----------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (304) 343-8171
                                                           --------------


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 [  ]


Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                                                Yes [  ] No [x]


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

                157,122,836 common shares as of October 12, 2007


Transitional Small Business Disclosure Format (check one)

                                                Yes [  ] No [x]




<PAGE>
                         PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The following financial statements are included herein in response to Item 1:


                                                                            PAGE

       FINANCIAL STATEMENTS (UNAUDITED)
       --------------------------------

       Consolidated Condensed Balance Sheets                                 F-1
       Consolidated Condensed Statements of Operations                       F-2
       Consolidated Condensed Statements of Cash Flows                       F-3
       Consolidated Condensed Statement of Mandatorily Redeemable
             Preferred Stock and Stockholders Equity (Deficit)               F-4
       Notes to Consolidated Condensed Financial Statements                  F-5




















                                       -2-

<PAGE>
<TABLE>
<CAPTION>
JACOBS FINANCIAL GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)


                                                                                       AUGUST 31, 2007              MAY 31, 2007
                                                                                       ---------------            ----------------
ASSETS

  INVESTMENTS AND CASH:
<S>                                                                                    <C>                        <C>
    Bonds held to maturity, at amortized costs                                         $   2,318,635              $      2,316,875
        (market value - 08/31/07 $2,322,017; 05/31/07 $2,308,003)
    Mortgage-back securities held to maturity, at amortized costs                          1,297,909                     1,369,411
        (market value - 08/31/07 $1,292,654; 05/31/07 $1,367,365)
    Short-term investments, at cost (approximates market value)                              461,710                       335,729
    Cash                                                                                      27,606                        25,298
                                                                                       ---------------            ----------------
                                              TOTAL INVESTMENTS AND CASH                   4,105,860                     4,047,313

    Investment income due and accrued                                                         34,507                        35,294
    Premiums and other accounts receivable                                                    42,014                        38,668
    Deferred policy acquisition costs                                                         62,556                        52,365
    Furniture and equipment, net of accumulated depreciation of $116,069 and
        $113,919, respectively                                                                21,479                        23,628
    Other assets                                                                              14,901                        22,801
    Intangible assets                                                                        150,000                       150,000
                                                                                       ---------------            ----------------
                                              TOTAL ASSETS                             $   4,431,317              $      4,370,069
                                                                                       ===============            ================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

    Reserve for losses and loss expenses                                               $     136,099              $        110,784
    Reserve for unearned premiums                                                            223,549                       144,188
    Advance premiums                                                                               -                       127,034
    Accrued expenses and professional fees                                                   556,666                       547,965
    Accounts payable                                                                         291,882                       345,895
    Notes payable                                                                            656,337                       410,136
    Accrued interest payable                                                                  14,805                        16,095
    Other liabilities                                                                        519,823                       511,751
                                                                                       ---------------            ----------------
                                              TOTAL LIABILITIES                             2,399,161                    2,213,848

    SERIES A  PREFERRED  STOCK,  $.0001  par value per share;  1 million  shares
    authorized; 1,467 shares issued and outstanding; stated liquidation value of
    $1,000 per share                                                                        1,479,645                    1,420,913
    SERIES B PREFERRED STOCK, $.0001 par value per share; 9,941.341 shares
    authorized; 9,621.940 shares issued and outstanding; stated liquidation
    value of $1,000 per share                                                               8,885,928                    8,526,059
                                                                                       ---------------            ----------------
                                      TOTAL MANDATORILY REDEEMABLE PREFERRED STOCK         10,365,573                    9,946,972

  STOCKHOLDERS' EQUITY (DEFICIT)

    Common stock, $.0001 par value per share; 490 million shares authorized;
    157,122,836 shares issued and outstanding                                                  15,712                       15,700
    Additional paid in capital                                                              2,114,144                    2,082,647
    Accumulated deficit                                                                   (10,463,273)                  (9,889,098)
                                                                                       ---------------            ----------------
                                             TOTAL STOCKHOLDERS' EQUITY (DEFICIT)          (8,333,417)                  (7,790,751)
                                                                                       ---------------            ----------------
                             TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)      $    4,431,317             $      4,370,069
                                                                                       ===============            ================
</TABLE>

                             See accompanying notes.
                                       F-1

<PAGE>
<TABLE>
<CAPTION>
JACOBS FINANCIAL GROUP, INC,
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)



                                                                       THREE MONTHS ENDED AUGUST 31,
                                                                      2007                       2006
                                                                 ----------------         -----------------
REVENUES:
<S>                                                              <C>                      <C>
  Investment advisory services                                   $       66,320           $       73,408
  Insurance premiums and commissions                                     91,237                   80,419
  Net investment income                                                  53,839                   45,678
                                                                 ----------------         -----------------
                                     TOTAL REVENUES                     211,396                  199,505


EXPENSES:
  Incurred policy losses                                                 25,315                   16,301
  Insurance policy acquisition costs                                     25,943                   26,204
  General and administrative                                            306,752                  338,328
  Mutual fund costs                                                      40,332                   46,426
  Depreciation                                                            2,149                    2,956
                                                                 ----------------         -----------------
                                    TOTAL EXPENSES                      400,491                  430,215
                                                                 ----------------         -----------------
                        NET INCOME (LOSS) FROM OPERATIONS              (189,095)                (230,710)

  Interest expense                                                      (30,992)                 (85,269)
  Interest income                                                             3                   11,092
                                                                 ----------------         -----------------
                                   NET INCOME (LOSS)                   (220,084)                (304,887)

  Accretion of Mandatorily Redeemable Convertible
  Preferred Stock, including accrued dividends                         (354,091)                (318,307)
                                                                 ----------------         -----------------

        NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS    $     (574,175)          $     (623,194)
                                                                 ================         =================

BASIC AND DILUTIVE NET INCOME (LOSS) PER SHARE:

       NET INCOME (LOSS) PER SHARE                               $            -           $            -
                                                                 ================         =================

       WEIGHTED-AVERAGE SHARES OUTSTANDING                          157,025,282              154,937,837
                                                                 ================         =================

</TABLE>



                             See accompanying notes.


                                       F-2


<PAGE>
<TABLE>
<CAPTION>
JACOBS FINANCIAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                                                            THREE MONTHS ENDED AUGUST 31,
                                                                                 2007             2006
                                                                              -----------    -------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                            <C>            <C>
Net Income (Loss)                                                              $(220,084)     $  (304,887)

  Adjustments  to reconcile  net income (loss) to net cash provided by (used in)
   operating activities:
  Unearned premium                                                               (47,673)           5,402
  Stock option expense                                                            28,593           57,868
  Stock issued (or to be issued) in connection with financing arrangements         2,426                -
  Provision for loss reserves                                                     25,315           16,302
  Amortization of premium                                                          3,390            7,486
  Depreciation                                                                     2,149            2,956
  Premium and other receivables                                                   (3,346)             (64)
  Accretion of discount                                                           (3,035)          (5,539)
  Investment income due and accrued                                                  787          (28,379)
  Deferred policy acquisition costs                                              (10,191)          (1,799)
  Change in operating assets and liabilities:
  Other assets                                                                     7,900           26,388
  Accounts payable and cash overdraft                                            (54,013)         (82,654)
  Accrued expenses and other liabilities                                          15,483           82,622
                                                                               -----------    -------------

                           NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES   (252,299)        (224,298)

CASH FLOWS FROM INVESTING ACTIVITIES

  Advances to related party                                                            -          (65,081)
  Repayments from related party                                                        -          127,227
  Increase in short-term investments                                            (125,258)        (185,973)
  Costs of bonds acquired                                                              -         (100,000)
  Repayment of mortgage-backed securities                                         68,664           94,242
  Purchase of furniture and equipment                                                  -           (1,335)
                                                                               -----------    -------------

                           NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES    (56,594)        (130,920)

CASH FLOWS FROM FINANCING ACTIVITIES

  Proceeds from issuance of Series A preferred stock                              40,000          186,000
  Proceeds from issuance of Series B preferred stock                              24,510                -
  Proceeds from the issuance of common stock                                         490                -
  Redemption of Series B preferred stock, including accrued dividends                  -          (10,477)
  Proceeds from related party debt                                               127,200                -
  Repayment of related party debt                                                (15,763)               -
  Proceeds from borrowings                                                       150,000          250,000
  Repayment of borrowings                                                        (15,236)          (5,729)
                                                                               -----------    -------------

               NET CASH FLOWS FROM FINANCING ACTIVITIES                          311,201          419,794

NET INCREASE (DECREASE) IN CASH                                                    2,308           64,576

CASH AT BEGINNING OF PERIOD                                                       25,298                -
                                                                               -----------    -------------

CASH AT END OF PERIOD                                                          $  27,606      $    64,576
                                                                               ===========    =============


SUPPLEMENTAL DISCLOSURES

  Interest paid                                                                $  22,507      $    11,407
  Income taxes paid                                                                    -                -
  Non-cash investing and financing transactions:
  Additional consideration for issuance of debt                                    2,426
</TABLE>




                             See accompanying notes.

                                       F-3
<PAGE>
<TABLE>
<CAPTION>
JACOBS FINANCIAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
FOR THE THREE MONTH PERIOD ENDED AUGUST 31, 2007


                            -------------------------------------------   ----------------------------------------------------------
                                                                                        STOCKHOLDERS' EQUITY (DEFICIT)
                            -------------------------------------------   ----------------------------------------------------------
                                                         SERIES B
                                  SERIES A       MANDATORILY REDEEMABLE
                            MANDATORILY REDEEMABLE      CONVERTIBLE                            ADDITIONAL
                                PREFERRED STOCK       PREFERRED STOCK                           PAID-IN    ACCUMULATED
                              SHARES   AMOUNT      SHARES       AMOUNT       SHARES   AMOUNT    CAPITAL      DEFICIT        TOTAL
                              -------  ------      -------      ------       ------   ------    -------      --------       -----
                            -------------------------------------------   ----------------------------------------------------------

<S>                           <C>    <C>         <C>         <C>          <C>         <C>     <C>          <C>          <C>
BALANCE, MAY 31, 2007         1,427  $1,420,913  9,596.940   $8,526,059   156,997,836 $15,700 $ 2,082,647  $(9,889,098) $(7,790,751)

 Issuance of Series A and
 B Preferred Stock and
 common stock                    40      40,000     25.000       24,510        25,000       2         488            -          490

 Issuance of common stock
 as additional consideration
 for financing arrangements       -           -          -            -       100,000      10       1,546            -        1,556

 Accretion of mandatorily
 redeemable convertible
 preferred stock                  -       3,930          -      124,918             -       -           -     (128,848)    (128,848)

 Accrued dividends of
 mandatorily redeemable
 convertible preferred
 stock                            -      14,802          -      210,441             -       -           -     (225,243)    (225,243)

 Expense of common shares
 to be issued in connection
 with financing arrangements      -           -          -            -             -       -         870            -          870

 Common stock option expense      -           -          -            -             -       -      28,593            -       28,593

 Net income (loss), three
 month period
 ended August 31, 2007            -           -          -            -             -       -           -     (220,084)    (220,084)


BALANCE, AUGUST 31, 2007      1,467  $1,479,645  9,621.940   $8,885,928   157,122,836 $15,712 $ 2,114,144 $(10,463,273) $(8,333,417)
                             ======  ==========  =========   ==========   =========== ======= =========== ============= ============
                           --------------------------------------------   ----------------------------------------------------------
</TABLE>





                             See accompanying notes.


                                       F-4

<PAGE>

JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION

The accompanying  unaudited financial  statements are of Jacobs Financial Group,
Inc.  (the  "Company" or "JFG").  These  financial  statements  were prepared in
accordance with generally accepted  accounting  principles for interim financial
information and Article 10 of Regulation S-X.  Accordingly,  they do not include
all of the information and footnotes required by generally  accepted  accounting
principles for complete financial statements. In the opinion of management,  all
adjustments  considered  necessary  for a fair  presentation  of the  results of
operations and financial condition for the periods presented have been included.
Such adjustments are of a normal recurring nature. The results of operations for
the three-month period ended August 31, 2007, are not necessarily  indicative of
the results of  operations  that can be expected  for the fiscal year ending May
31, 2008.  For further  information,  refer to the Company's  audited  financial
statements  and  footnotes  thereto  included in Item 7. of Form 10-KSB filed on
September 13, 2007.

RECLASSIFICATIONS

Certain amounts in the 2006  Consolidated  Condensed  Financial  Statements have
been  reclassified  to be consistent with the  presentation in the  Consolidated
Condensed  Financial  Statements  as of August 31, 2007 and for the  three-month
period then ended. These  reclassifications had no impact on previously reported
net income, cash flow from operations or changes in shareholder equity.

LIQUIDITY AND GOING CONCERN

These  financial  statements  are  presented  on the basis that the Company is a
going  concern.  Going concern  contemplates  the  realization of assets and the
satisfaction  of  liabilities in the normal course of business over a reasonable
length of time.  The Company  incurred  operating  losses  (after  accretion  of
mandatorily redeemable convertible preferred stock, including accrued dividends)
of approximately  $2,661,000 and $1,874,000 for the years ended May 31, 2007 and
2006 and has  incurred  losses of  approximately  $574,000  for the  three-month
period  ended  August  31,  2007.  Losses are  expected  to  continue  until the
Company's  insurance  company  subsidiary,   First  Surety  Corporation  ("FSC")
develops substantial business.  While improvement is anticipated as the business
plan is implemented,  restrictions on the use of FSC's assets (See  Management's
Discussion  and  Analysis),  the  Company's  significant  deficiency  in working
capital and  stockholders'  equity raise  substantial  doubt about the Company's
ability to continue as a going concern.

Management  intends to  continue  with  steps it has taken to improve  cash flow
through  the  implementation  of its  business  plan.  Additionally,  management
continues  to seek to raise  additional  funds for  operations  through  private
placements  of stock,  other  long-term or permanent  financing,  or  short-term
borrowings.  However,  the  Company  cannot be  certain  that it will be able to
continue to obtain  adequate  funding in order to reasonably  predict whether it
will  be  able  to  continue  as a going  concern.  The  accompanying  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

                                       F-5

<PAGE>
JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE B - RECENT ACCOUNTING PRONOUNCEMENTS

In December  2004,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  of  Financial  Accounting  Standard  ("SFAS")  No. 123R  "Share-Based
Payment"  ("SFAS 123R"),  a revision to SFAS No. 123 "Accounting for Stock-Based
Compensation"  ("SFAS 123"),  and superseding APB Opinion No. 25 "Accounting for
Stock Issued to Employees" and its related  implementation  guidance.  SFAS 123R
establishes  standards for the  accounting for  transactions  in which an entity
exchanges  its equity  instruments  for goods or services,  including  obtaining
employee services in share-based payment transactions.  SFAS 123R applies to all
awards  granted  after  the  required  effective  date and to  awards  modified,
repurchased,  or cancelled  after that date.  Adoption of the provisions of SFAS
123R is effective as of the beginning of the first annual  reporting period that
begins after June 15,  2005.  JFG has adopted the  provisions  of SFAS 123R with
respect to its stock-based compensation plan.

In  December  2004,  the FASB  issued  FASB  Statement  No.  153  "Exchanges  of
Nonmonetary Assets-an amendment of APB Opinion No. 29". This Statement addresses
the measurement of exchanges of nonmonetary  assets. The guidance in APB Opinion
No. 29, ACCOUNTING FOR NONMONETARY TRANSACTIONS,  is based on the principle that
exchanges of  nonmonetary  assets should be measured  based on the fair value of
the assets exchanged.  The guidance in that Opinion,  however,  included certain
exceptions to that principle.  This Statement amends Opinion 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general  exception for exchanges of  nonmonetary  assets that do not have
commercial  substance.  A nonmonetary  exchange has commercial  substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. This Statement is effective for financial statements for fiscal
years  beginning  after June 15, 2005.  Earlier  application  was  permitted for
nonmonetary  asset  exchanges  incurred  during fiscal years beginning after the
date of this  Statement was issued.  The adoption of the  provisions of SFAS No.
153 did not have a material  impact on the  Company's  results of  operations or
financial position.

In June 2005,  the FASB  issued  Statement  154,  "Accounting  Changes and Error
Corrections"  which  replaces APB Opinion 20 and FASB Statement 3. Statement 154
changes  the  requirements  for the  accounting  and  reporting  of a change  in
accounting principle. Opinion 20 previously required that most voluntary changes
in accounting principles be recognized by including the cumulative effect of the
new  accounting  principle in net income of the period of change.  Statement 154
now requires  retrospective  application  of changes in accounting  principle to
prior period financial statements,  unless it is impractical to determine either
the  period-specific  effects  or  the  cumulative  effect  of the  change.  The
statement was effective for fiscal years  beginning after December 15, 2005. The
adoption of the provisions of SFAS No. 154 did not have a material impact on the
Company's results of operations or financial position.

In  February  2006,  FASB  issued SFAS No. 155  "Accounting  for Certain  Hybrid
Financial  Instruments-an  amendment of FASB  Statements No. 133 and 140".  This
statement  address  accounting  issues  relating  to  beneficial   interests  in
securitized  financial  assets.  This  Statement is effective  for all financial
instruments  acquired or issued after the beginning of an entity's  first fiscal
year that begins after  September  15, 2006.  The adoption of the  provisions of
SFAS  No.  155 did not  have a  material  impact  on the  Company's  results  of
operations or financial position.

                                       F-6
<PAGE>
JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

In March 2006,  FASB issued SFAS No. 156  "Accounting for Servicing of Financial
Assets-an  amendment  of FASB  Statement  No.  140".  This  statement  addresses
accounting for separately  recognized servicing assets and servicing liabilities
when an entity undertakes a contract to service financial assets. This Statement
is to be adopted as of the  beginning of the first fiscal year that begins after
September 15, 2006.  The adoption of the provisions of SFAS No. 156 did not have
a material impact on the Company's results of operations or financial position.

In September  2006,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  157 "Fair  Value
Measurements"  and SFAS No.  158  "Employers'  Accounting  for  Defined  Benefit
Pension and Other  Postretirement  Plans-an amendment of FASB Statements No. 87,
88, 106 and 132(R)".

SFAS No. 157 defines fair value,  establishes  a framework  for  measuring  fair
value in generally accepted accounting principles, and expands disclosures about
fair value  measurements.  The  Statement  does not  require  any new fair value
measurements, however, for some entities, the application of this Statement will
change  current  practice.  This  Statement  is to be adopted  for fiscal  years
beginning  after  November 15,  2007,  and interim  periods  within those fiscal
years. Management does not expect the adoption of the provisions of SFAS No. 157
to have a material  impact on the  Company's  results of operations or financial
position.

SFAS No. 158 requires  employers  to recognize  the  overfunded  or  underfunded
status of a defined  benefit  postretirement  plan (other  than a  multiemployer
plan) as an asset or  liability in its  statement  of financial  position and to
recognize  changes in that funded  status in the year in which the changes occur
through  comprehensive  income  of a  business  entity.  The  Company  does  not
currently provide any defined benefit postretirement plans, and accordingly, the
provisions of SFAS No. 158 will have no material impact on the Company's results
of operations or financial position.

In  September  2006,  the  Securities  and  Exchange   Commission  issued  Staff
Accounting  Bulletin  (SAB) No.  108  "Considering  the  Effects  of Prior  Year
Misstatements   when   Quantifying   Misstatements  in  Current  Year  Financial
Statements."  SAB 108 provides  guidance on the  consideration of the effects of
prior year  misstatements  in  quantifying  current year  misstatements  for the
purpose of a  materiality  assessment.  SAB 108 is  effective  for fiscal  years
ending  after  November  15,  2006.  The  application  of SAB 108 did not have a
material impact on the Company's results of operations or financial position.

In  February  2007,  the FASB  issued  SFAS No. 159 "The Fair  Value  Option for
Financial  Assets and  Financial  Liabilities--including  an  amendment  of FASB
Statement No. 115." This  Statement  permits  entities to choose to measure many
financial  instruments and certain other items at fair value. Such items include
recognized  financial  assets and financial  liabilities,  firm commitments that
involve  only  financial  instruments,   nonfinancial  insurance  contracts  and
warranties  that the insurer can settle by paying a third party to provide these
goods or services and host financial instruments resulting from separation of an
embedded   nonfinancial   derivative   instrument  from  a  nonfinancial  hybrid
instrument.  The objective of the Statement is to improve financial reporting by
providing  entities  with the  opportunity  to mitigate  volatility  in reported
earnings caused by measuring related assets and liabilities  differently without
having to apply complex hedge accounting provisions. This Statement is effective
for fiscal years beginning after November 15, 2007 although early adoption is

                                       F-7

<PAGE>
JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

permitted.  Management does not expect the application of SFAS No. 159 to have a
material impact on the Company's results of operations or financial position.

In June 2006,  Financial  Accounting Standards Board Interpretation (FIN) No. 48
"Accounting  for  Uncertainty  in Income Taxes" was issued and  interprets  FASB
Statement No. 109  "Accounting  for Income  Taxes." FIN No. 48  establishes  the
accounting for uncertain tax positions, including recognition and measurement of
their  financial  statement  effects.  FIN No. 48 is effective  for fiscal years
beginning  after December 15, 2006. The Company has  significant  operating loss
carryforwards,  the benefits of which having been fully  reserved by a valuation
allowance of the same amount due to uncertainty as to the likelihood of ultimate
realization.  Management  has evaluated the  implications  of FIN No. 48 and has
determined  that the application of FIN 48 did not result in any material impact
on the Company's results of operations or financial position.


NOTE C - NOTES PAYABLE AND ADVANCES FROM RELATED PARTY

In the three-month  period ended August 31, 2007, the Company borrowed  $150,000
from individuals and closely-held companies under unsecured demand notes bearing
interest rates at 10.00% per annum and issued 100,000 shares of its common stock
as additional consideration for the extension of such credit. The Company repaid
outstanding  unsecured  advances from its largest  shareholder and CEO as of May
31, 2007 in the amount of $15,763, and subsequently  received unsecured advances
amounting to $127,200.  Proceeds of such  borrowings  and advances  were used to
fund on-going operations.

The Company has repaid  $100,000 of the demand note  borrowings  and $120,000 of
the advances from related party from proceeds  obtained from financing  obtained
subsequent to August 31, 2007 (See Note F - Subsequent Events).


NOTE D - OTHER LIABILITIES

The Company had been delinquent in paying certain of its payroll tax obligations
for  periods  ending on or  before  December  31,  2005.  The  total  liability,
including an estimate for penalties and interest, is approximately  $516,025 and
is included  in the  Company's  financial  statements  under Other  Liabilities.
Management  has  initiated  efforts to satisfy  this  obligation  with  proceeds
obtained  from  financing  obtained  subsequent to August 31, 2007 (See Note F -
Subsequent Events).


NOTE E - MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCK

In the  three-month  period  ended  August  31,  2007,  the  Company  issued  an
additional  25 shares  of Series B  Preferred  Stock  and  25,000  shares of the
Company's common stock as additional consideration,  in exchange for cash in the
amount of $25,000.  As of August 31,  2007,  the  Company has 319.401  shares of
Series B Preferred stock authorized and available for issue.

                                       F-8
<PAGE>
JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE F - SUBSEQUENT EVENTS

Subsequent to August 31, 2007, the Company borrowed  $2,100,000 in the aggregate
from a group of individuals to provide  interim  bridge-financing  of operations
until a larger, more permanent financing the Company contemplates undertaking is
consummated  and  to pay  fees  and  expenses  in  connection  with  the  larger
financing.  The  terms  of this  borrowing  provide  for  payment  in full  upon
consummation  by the  Company  of a  qualified  equity  offering  providing  net
proceeds of at least $50 million;  or if such a qualified equity offering is not
consummated by the six-month anniversary date of the notes (March 2008), accrued
interest-to-date  shall be payable, with quarterly installments of principal and
interest  in the  aggregate  amount of  $134,975  commencing  in June 2008.  The
interest rates on such notes are fixed at 10.00%.  Furthermore,  upon retirement
of the notes upon consummation of a qualified equity offering, the Company shall
issue a total of 4.20% of the Company's  outstanding  common shares  immediately
following  such  offering  as  additional  consideration;   in  the  event  that
consummation of a qualified  equity offering is not achieved by March 2008, then
the Company  shall issue a total of 4.20% of the  Company's  outstanding  common
shares  at such  date  and  shall  issue  a  total  of  1.68%  of the  Company's
outstanding  common shares upon each  six-month  anniversary  date thereof until
retirement of the notes.

Additionally,  terms of the $25,000 note payable  outstanding as of May 31, 2007
have been modified in accordance with the terms of the Company's  agreement with
the  holder  of  the  note  to  correspond  to  the  terms  of  the   $2,100,000
bridge-financing obtained in September 2007. Accordingly, upon retirement of the
note upon consummation of a qualified equity offering, the Company shall issue a
total of 0.05% of the Company's  outstanding common shares immediately following
such offering as additional  consideration;  in the event that consummation of a
qualified  equity offering is not achieved by March 2008, then the Company shall
issue a total of 0.05% of the Company's  outstanding  common shares at such date
and shall issue a total of .02% of the Company's  outstanding common shares upon
each six-month  anniversary date thereof until retirement of the note. All other
terms and conditions remain unchanged.

On  September  30,  2007,  the Company  elected to continue to defer  payment of
dividends on its Series A Preferred stock and Series B Preferred stock with such
accrued and unpaid dividends amounting to $15,438 and $217,485, respectively. As
of September 30, 2007, the accumulated accrued and unpaid dividend on the Series
A  Preferred  stock  and  Series B  Preferred  stock  amounted  to  $85,903  and
$1,381,137, respectively.


NOTE G - SEGMENT REPORTING

The Company has two reportable segments, investment advisory services and surety
insurance products and services.  The following table presents revenue and other
financial information by industry segment.

                                       F-9

<PAGE>
JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


                                                 THREE-MONTH PERIOD ENDED
         INDUSTRY SEGMENT                      AUGUST 31,            AUGUST 31,
                                                  2007                  2006
                                               ---------             ---------
REVENUES:
 Investment advisory                           $  66,320             $  73,408
 Surety insurance                                145,076               126,097
 Corporate                                             -                     -
                                               ---------             ---------
 Total revenues                                $ 211,396             $ 199,505
                                               =========             =========

NET INCOME (LOSS):
 Investment advisory                           $( 64,105)            $(142,072)
 Surety insurance                                 32,471                 6,847
 Corporate                                      (188,450)             (169,662)
                                               ---------             ---------
 Total net income (loss)                       $(220,084)            $(304,887)
                                               =========             =========



















                                      F-10

<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RECENT DEVELOPMENTS AND FUTURE DIRECTION OF COMPANY

The  Registrant  (the  Company) is a holding  company that conducts its business
through three principal  directly or indirectly  owned  operating  subsidiaries:
First Surety Corporation  (FSC), an insurance  company;  Triangle Surety Agency,
Inc. (Triangle),  an insurance agency; and Jacobs & Company (J&C), an investment
advisory  firm. FSC was acquired at the end of 2005,  and this  acquisition  has
allowed  the  Company to pursue  its  business  plan to market and issue  surety
bonds.  Triangle  serves  as the  marketing  agent for FSC,  and  collateralized
accounts  required as a condition  of the  issuance of surety  bonds under FSC's
programs  are managed by J&C.  Implementation  of this  business  plan  provides
revenue  streams to the  Company  in the form of  insurance  premium  and agency
commission  income from the issuance of surety bonds,  investment  advisory fees
from the management of the collateral  accounts  securing surety bonds and other
investment  accounts,  and  investment  income  relating to  investment of FSC's
surplus and reserves.

The bonding  programs  offered by FSC are specialized in nature and are targeted
principally to the coal and oil & gas industries.  FSC currently writes only the
surety line of business,  is licensed to write surety only in West  Virginia and
has focused its primary  efforts on marketing  surety bonds  required by federal
and state  agencies as a condition  for the client's  obtaining  permits to mine
coal.  Of primary  importance to the  Company's  ability to fully  implement its
business  plan  is the  expansion  of  that  business  into  additional  states.
Regulatory  approval and licensing is required for each state where FSC seeks to
conduct  business.  Management has found that entry into additional states (as a
surety) has been difficult  without the benefit of more substantial  capital and
reserves  due to FSC's  status as new  entry  into this  market.  Management  is
pursuing  avenues  that will  provide  additional  capital  to  facilitate  such
expansion.

The Company is  headquartered  in  Charleston,  West  Virginia,  and through its
wholly-owned subsidiaries, employs a total of nine (9) full-time employees.

RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED AUGUST 31, 2007

The  Company  experienced  a loss (after  accretion  of  mandatorily  redeemable
convertible preferred stock) for the three-month period ended August 31, 2007 in
the amount of $574,175 as compared with a loss of $623,194 for the corresponding
period ended August 31, 2006.

REVENUES

Revenues  from  operations  for the  three-month  period  ended  August 31, 2007
were$211,396 as compared with $199,505 for the corresponding period ended August
31, 2006. The overall increase in revenues is attributable to the acquisition of
FSC and the surety business it has secured since January 1, 2006.

                                       -3-

<PAGE>

Quarterly revenues from the Company's  investment  management segment (J&C), net
of advisory referral fees, were $66,320 for the three-month  period ended August
31, 2007 as compared with $73,408 for the corresponding  period ended August 31,
2006. As investment  advisory fees are based on the market value of assets under
management,  some fluctuation will occur due to overall market  conditions.  For
the most part,  however,  such  revenues  will remain  relatively  constant from
quarter to quarter with any large  fluctuations being attributable to the growth
or loss of assets under management.

Fees for investment  advisory  services for  individually  managed  accounts are
billed calendar quarterly based on end-of-quarter market values. Monthly revenue
estimates  are  based  on the  most  recent  quarter's  fees,  as  adjusted  for
anticipated  increases or decreases in assets under management,  and adjusted to
actual at the end of each quarter.  In the  three-month  period ended August 31,
2006,  due to a  larger  than  anticipated  increase  in  investment  collateral
accounts  being  added in the 2nd  quarter  of  2006,  investment  advisory  fee
revenues  recorded  for the period  included  an end-of  quarter  adjustment  of
approximately $8,000 that had not been anticipated. Excluding the impact of this
adjustment,  revenues from investment advisory services were relatively constant
for the corresponding periods.

Quarterly  revenues from the Company's surety insurance  segment,  consisting of
FSC and Triangle, were $145,076 for the three-month period ended August 31, 2007
as compared  with $126,097 for the  corresponding  period ended August 31, 2006.
Revenues  attributable to premium earned,  net investment income and commissions
earned are as follows:


                          3 MONTH PERIOD ENDED
                               AUGUST 31,
                            2007        2006
                         ---------   ---------
Premium earned            $ 84,537    $ 75,820
Net investment income       53,839      45,678
Commissions earned           6,700       4,599
                         ---------   ---------
                 Total   $ 145,076   $ 126,097
                         ==========  =========

Revenues  for this  segment of the  business  are  expected to be somewhat  more
"seasonable" from  quarter-to-quarter  as commission revenue is dependent on the
timing of issuance or renewal of bonds  placed by the Company,  whereas  premium
revenue is  recognized  ratably  over the term of the policy  period and thus is
more  stable  from  period  to  period.  Fluctuations  in  premium  revenue  for
comparable  periods  largely  reflect  the overall  growth or loss of  business.
Theincrease in premium revenue for the three-month  period ended August 31, 2007
in comparison to the corresponding period from the prior year is a result of the
FSC adding new clients to its surety business in addition to increased  business
from  existing  clients.  Investment  income is  expected  to remain  relatively
consistent, but can fluctuate based on interest rates and market conditions. The
increase  in the  corresponding  periods  reflects  growth  in  assets  held for
investment in FSC's investment  portfolio,  as investment yields were relatively
constant for the respective periods.

                                       -4-

<PAGE>

EXPENSES

The Company has experienced no claims for losses as of August 31, 2007. However,
"incurred but not reported"  (IBNR)  policy  losses for the  three-month  period
ended  August 31, 2007 and 2006  amounted  to $25,315 and $16,301  respectively.
Such  amounts  represent  the  provision  for loss and loss  adjustment  expense
attributable  to surety  bonds issued by FSC since its  acquisition  in December
2005.  Such estimates are based on industry  averages  adjusted for factors that
are unique to the FSC's  underwriting  approach and are constantly  reviewed for
adequacy  based on current  market  conditions and other factors unique to FSC's
business.  The  increase in  estimates  for IBNR losses  between the  respective
periods is primarily  due to  management's  decision to increase  its  estimates
beginning with the 4th quarter of 2006.

Insurance policy  acquisition costs in the amount of $25,943 and $26,204 for the
three-month  periods  ended  August 31, 2007 and 2006,  respectively,  represent
charges to operations for  underwriting  expense and premium tax attributable to
surety polices issued by FSC and are recognized ratably over the period in which
premiums are earned.

General and administrative expenses for the three-month periods ended August 31,
2007 and 2006 were $306,752 and $338,328  respectively,  representing a decrease
of approximately $31,500, and were comprised of the following:

                                           THREE-MONTH PERIOD ENDED
                                                  AUGUST 31,
                                              2007          2006     DIFFERENCE
                                              ----          ----     ----------

Salaries and related costs                 $ 169,186     $ 191,327   $ (22,141)
General office expense                        27,961        27,862          99
Legal and other professional fees             26,857        16,960       9,897
Audit, accounting and related services        22,953        26,010      (3,057)
Travel, meals and entertainment               10,670        29,066     (18,396)
Other general and administrative              49,125        47,103       2,022
                                          ----------    ----------   ----------

Total general and administrative           $ 306,752     $ 338,328   $ (31,576)
                                          ==========    ==========   ==========

Salaries and related costs, net of deferred internal policy  acquisition  costs,
increased  approximately  $7,000  attributable to increased staffing and related
costs  necessitated by the company's  growth and increased  benefit costs.  This
increase  was  offset by a decrease  in stock  option  expense of  approximately
$29,000.

In the  three-month  periods  ended  August 31,  2007 and 2006,  legal and other
professional  fees  included   approximately  $23,725  and  $8,500  respectively
relating to the Company's  on-going efforts to raise additional  capital for the
expansion of the surety business into other states. Other legal and professional
fees incurred in the respective periods were for other corporate matters.

                                       -5-

<PAGE>

Expenses related to travel,  meals and entertainment  decreased by approximately
$18,500  for the  three-month  period  ended  August 31, 2007 as compared to the
comparable 2006 period. This decrease is primarily  attributable to management's
decision  to curtail  its  participation  in  certain  coal  industry  events in
addition to less  out-of-town  travel  related to efforts in raising  additional
capital.

J&C is the investment  advisor to the Jacobs & Company Mutual Fund (the "Fund").
While  the Fund is  responsible  for its own  operating  expenses,  J&C,  as the
advisor,  has agreed to limit the Fund's aggregate annual operating  expenses to
2.00% of the average net assets.  Under this expense limitation  agreement,  J&C
absorbed  approximately  $40,332 of the  Fund's  operating  expenses  during the
three-month   period   ended   August  31,  2007  as  compared  to  $46,426  for
corresponding  period from the previous year. This decrease can be attributed to
a  nonrecurring  adjustment  made to expense  accruals  in the in the prior year
period.  As the Fund grows in size (of assets  under  management),  expenses (in
excess of the 2% level)  absorbed by J&C will  decrease  until the Fund  reaches
sufficient  size to support its on-going  operating  costs,  while revenues from
investment  advisory fees will  increase.  In contrast,  as the Fund declines in
size (of assets under management), expenses (in excess of the 2% level) absorbed
by J&C  will  increase,  while  revenues  from  investment  advisory  fees  will
decrease.  For  the  three-month  period  ended  August  31,  2007,  the  Fund's
investment  advisory fees  decreased to $12,443 as compared with $15,225 for the
corresponding three-month period ended August 31, 2006 as a result of a decrease
in the Fund size.  The Fund's  average  assets under  management  declined  from
approximately  $4.9 million for the three-month  period ended August 31, 2006 to
approximately $4.05 million for the three-month period ended August 31, 2007. As
of August 31, 2007, assets under management were approximately $3.5 million.

The Fund was  initially  established  by Jacobs to provide the ability to manage
funds for smaller accounts in a more efficient and diversified manner than could
be achieved on an individual account basis.  Additionally,  the Fund provided an
investment  vehicle that would fit within the Company's broader business plan of
issuing smaller bonds under its collateralized surety programs. While the Fund's
lackluster  performance  has contributed to its gradual decline in size, and the
maintenance  of the Fund continues to be a significant  cost to the Company,  it
remains a key component in the Company's  broader  business plan.  Moreover,  if
successful in these broader  efforts,  the opportunity  exists to  significantly
increase  the assets  under  management  within the Fund.  Should the Company be
successful  in  increasing  the size of the Fund to such a level that the Fund's
operating  expense ratio falls below the 2.00% level,  the costs absorbed by J&C
are currently  reimbursable to it for a period of up to three years.  Management
continually evaluates the cost/benefit of maintaining the Fund.

INTEREST EXPENSE

Interest expense for the three-month period ended August 31, 2007 was $30,992 as
compared  with  $85,269 for the  corresponding  period  ended  August 31,  2006.
Included in interest  expense for the  three-month  period ended August 31, 2006
was an  additional  accrual of  approximately  $70,000  relating  to  additional
interest owed on the Company's payroll tax liability,  based on notices received
from the  Internal  Revenue  Service.  Interest  on the  Company's  payroll  tax
liability has been included in other  liabilities in the Consolidated  Condensed
Balance Sheet. Excluding this amount, the increase in interest expense is

                                       -6-
<PAGE>

attributable to increased  borrowings needed to fund on-going  operations of the
Company.

ACCRETION AND DIVIDENDS

Accretion of mandatorily redeemable convertible preferred stock in the amount of
$354,091  for the  three-month  period  ended  August 31, 2007 is  comprised  of
accretion of discount in the amount of $128,848 and accrued but unpaid dividends
on  preferred  stock  in  the  amount  of  $225,243.  Accretion  of  mandatorily
redeemable  convertible  preferred  stock  in the  amount  of  $318,307  for the
three-month  period  ended August 31, 2006 is comprised of accretion of discount
in the amount of $122,086 and accrued but unpaid dividends on preferred stock in
the amount of $196,221.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

INTANGIBLE ASSETS

In exchange for the purchase  price of $2.9 million for the  acquisition of FSC,
the Company  received cash and  investments  held by FSC totaling $2.75 million,
with the difference  being  attributed to the  multi-line  property and casualty
licenses of FSC in the states of West Virginia,  Ohio and Indiana. Such licenses
have  indefinite  lives  and  are  evaluated  annually  for  recoverability  and
impairment loss.  Impairment loss, if any, is measured by estimating future cash
flows  attributable  to such  assets  based on  forecasts  and  projections  and
comparing such  discounted cash flow amounts to the carrying value of the asset.
Should actual results differ from such  forecasts and  projections,  such assets
may be subject to future impairment charges.

RESERVE FOR LOSSES AND LOSS EXPENSES

Reserves  for  unpaid  losses  and loss  adjustment  expenses  of the  insurance
subsidiary are estimated using individual  case-basis  valuations in conjunction
with estimates derived from industry and company experience. FSC has experienced
no claims for losses as of August 31, 2007.

FSC is currently  licensed to write surety in West  Virginia and has focused its
efforts  primarily  on coal  permit  bonds.  Reclamation  of land  that has been
disturbed  by  mining  operations  is  highly  regulated  by  federal  and state
jurisdictions,  and the surety bonds that are posted to assure that  reclamation
is accomplished are generally  long-term in nature,  with mining  operations and
reclamation  work being  conducted  in unison as the  property  is being  mined.
Additionally,  no two  principals or properties  are alike due to varied company
structures and unique  geography and geology of each site. In underwriting  coal
reclamation bonds, management obtains estimates of costs to reclaim the relevant
properties, in accordance with the specifications of the mining permit, prepared
by independent  outside  professionals  experienced in this field of work.  Such
estimates are then periodically updated and compared with marketable  securities
pledged and held in a collateral account in which FSC has a security interest as
collateral for the surety bond, to significantly  mitigate the exposure to loss.
Should the principal default in its obligation to reclaim

                                       -7-
<PAGE>

the  property as specified  in the mining  permit,  FSC would then use the funds
held in the  collateral  account to reclaim  the  property  or forfeit  the face
amount of the surety bond.  Losses can occur if the costs of reclamation  exceed
the estimates  obtained at the time the bond was underwritten or upon subsequent
re-evaluations,  if  sufficient  collateral  is not obtained and  increased,  if
necessary, or if the collateral held has experienced  significant  deterioration
in value.

In establishing its reserves for losses and loss adjustment expense,  management
continually   reviews  its  exposure  to  loss  based  on  reports  provided  in
conjunction with the periodic monitoring and inspections performed, the value of
the  collateral  accounts  held for the  benefit  of FSC,  along  with  industry
averages and  historical  experience.  At the  inception  of surety  operations,
management  estimated  such losses  based on industry  experience,  adjusted for
factors that are unique to the  Company's  approach,  and in  consultation  with
consulting actuaries experienced in the surety field.


ANALYSIS OF LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

Pursuant to the  approval  of the  transaction  to acquire FSC by the  Insurance
Commissioner  of the State of West  Virginia,  the Company is  restricted in its
ability to withdraw  monies from FSC without the prior approval of the Insurance
Commissioner.  Accordingly,  substantially all of the Company's  investments and
cash in the amount of  $4,103,445  as of August 31, 2007 are  restricted to FSC.
Furthermore,  additional  capital  raised  pursuant  to the  sale  of  Series  A
preferred   stock  of  the   Company  in   connection   with  the   issuance  of
partially-collateralized  surety bonds must be  contributed  by the Company into
the surplus accounts of FSC. Accordingly,  because of these restrictions,  as of
August 31, 2007, a deficiency in working capital exists as the Company's current
liabilities exceed its available current assets by approximately $2,200,000. The
Company's  ability to pay  dividends  accrued  with  respect to its Series A and
Series B preferred stock will be limited until such time as current  liabilities
are  substantially  liquidated and sufficient cash flow from operations is being
generated to service such obligations.

For the  three-month  period ended August 31, 2007,  the Company  experienced  a
deficiency  in  cash  flow  from  operations  of  approximately  $250,000.  Such
deficiency  was funded through  short-term  borrowings and the sale of shares of
the Company's Series B Preferred stock.  While management expects revenue growth
and  cash  flow  to  increase  significantly  as  its  business  plan  is  fully
implemented,  it anticipates that losses and working capital  deficiencies  will
continue until FSC is able to develop a substantial book of business.

Management  remains  encouraged  as to the  overall  market  conditions  for the
Company's products and services and the need for additional bonding capacity, by
both  large and small  companies.  Management  has found  that  entry into other
states (as a surety) has been difficult  without the benefit of more substantial
capital  and  reserves  due to FSC's  status  as new  entry  into  this  market.
Management   believes   that  if  FSC's   capital  and  surplus   reserves  were
significantly   more  substantial,   entry  into  other  states  would  be  less
challenging.  Accordingly,  management  continues  to  pursue  avenues  that can
provide additional capital to increase the capacity of its insurance  subsidiary
and to fund continuing operations as the business is being fully developed.

                                       -8-
<PAGE>

Through the sharing of resources (primarily personnel), management has continued
efforts to minimize operating costs. Although FSC is now cash flow positive, the
use of its assets and profits are  restricted  to its  stand-alone  operation by
regulatory   authority  until  its  capital  and  surplus  reserves  reach  more
substantial  levels.  And while growth of the FSC business  continues to provide
additional cash flow to the Company's other subsidiaries,  J&C and Triangle,  it
is anticipated that working capital  deficiencies will continue and will need to
be met either through the raising of additional capital or borrowings.  However,
there can be no assurance that  additional  capital (or debt  financing) will be
available when and to the extent required or, if available,  on terms acceptable
to the Company. Accordingly, concerns as to the Company's ability to continue as
a going concern are substantial.  The consolidated  financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.


ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF INTERNAL AND DISCLOSURE CONTROLS

As required by Rule 13a-15 under the Securities  Exchange Act of 1934, as of the
end of the period  covered by the  quarterly  report,  being August 31, 2007, we
have carried out an evaluation of the  effectiveness of the design and operation
of the Company's disclosure controls and procedures. This evaluation was carried
out  under  the  supervision  and  with  the   participation  of  the  Company's
management,  including  Company's  president and chief financial officer.  Based
upon that evaluation,  the Company's  president and chief financial officer have
concluded that the Company's disclosure controls and procedures are effective as
of the end of the period  covered by this report.  There have been no changes in
our internal  controls over financial  reporting  that occurred  during the most
recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect our internal controls over financial reporting.



                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

In June 2007,  25 shares of Series A  Preferred  Stock were  issued  pursuant to
ongoing bonding programs of FSC in exchange for cash in the amount of $25,000.

In August 2007,  15 shares of Series A Preferred  Stock were issued  pursuant to
ongoing bonding programs of FSC in exchange for cash in the amount of $15,000.

In June 2007, 25 shares of Series B Preferred  Stock and 25,000 shares of common
stock were issued to an individual  (less than 5%  shareholder)  in exchange for
cash in the amount of $25,000.

                                       -9-

<PAGE>

By its terms, the Series B preferred stock provides the holder with a conversion
privilege  pursuant  to which each share of such stock may be  converted  at the
option of the holder into 1,000 shares of common stock.

Certificates  of  Designations,  Powers,  Preferences  and  Rights  of  Series A
Preferred  Stock and Series B Preferred  Stock adopted by the Board of Directors
of the  Company  on  December  22,  2005 are set forth as  Exhibits  4.1 and 4.2
respectively.

The  issuance  of the  aforementioned  securities  is exempt  from  registration
provisions of the Securities Act of 1933, as amended (the "Securities  Act"), by
reason of the provision of Section 4(2) of the Securities  Act, as  transactions
not involving any public  offering,  in reliance upon,  among other things,  the
representations made by the investors, including representations regarding their
status  as  accredited  investors  (as  such  term is  defined  under  Rule  501
promulgated  under the Securities Act), and their  acquisition of the securities
for  investment  and not  with a  current  view  to  distribution  thereof.  The
securities  contain  a  legend  to the  effect  that  such  securities  are  not
registered  under  the  Securities  Act  pursuant  to  an  exemption  from  such
registration. The issuance of the securities was not underwritten.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.


                                      -10-

<PAGE>



ITEM 6. EXHIBITS

         3.1      Company's Articles of Incorporation (1)
         3.2      Company's By-laws (1)
         3.3      Certificate  of  the  Designations,  Powers,  Preferences  and
                  Rights of Series A Preferred  Stock of Jacobs  Financial Group
                  (1)
         3.4      Certificate  of  the  Designations,  Powers,  Preferences  and
                  Rights of Series B Preferred  Stock of Jacobs  Financial Group
                  (1)
         4.1      Certificate  of  the  Designations,  Powers,  Preferences  and
                  Rights of Series A Preferred  Stock of Jacobs  Financial Group
                  (1)
         4.2      Certificate  of  the  Designations,  Powers,  Preferences  and
                  Rights of Series B Preferred  Stock of Jacobs  Financial Group
                  (1)
         31.1     Certification  of Chief  Executive  Officer  pursuant  to Rule
                  13a-146.1  promulgated  under the  Securities  Exchange Act of
                  1934
         31.2     Certification  of Chief  Financial  Officer  pursuant  to Rule
                  13a-146.1  promulgated  under the  Securities  Exchange Act of
                  1934
         32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C.
                  Section  1950,  as  adopted  pursuant  to  Section  906 of the
                  Sarbanes-Oxley Act of 2002
         32.2     Certification of Chief Financial Officer pursuant to 18 U.S.C.
                  Section  1950,  as  adopted  pursuant  to  Section  906 of the
                  Sarbanes-Oxley Act of 2002

                  (1)      Incorporated  by reference to the  Company's  Current
                           Report on form 8-K dated December 29, 2005.



SIGNATURES

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

                          JACOBS FINANCIAL GROUP, INC.
                      -----------------------------------
                                  (Registrant)

Dated: October 22, 2007               By:    /s/ John M. Jacobs
                                      ------------------------------
                                                 JOHN M. JACOBS
                                                 PRESIDENT



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