**FORM      10-QSB**

**JACOBS      FINANCIAL GROUP, INC.**

| Delaware                                                                                                                            | 0-21210                                 | 84-0922335                                       |
|-------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|--------------------------------------------------|
| (State                or other jurisdiction    of                incorporation)                                 | (Commission                File Number) | (IRS                Employer Identification No.) |
|                                                                                                                                |
| 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                              |

| Yes | [                X] | No | [___] |
|-----|---------------------|----|-------|

| Yes | [__] | No | [X] |
|-----|------|----|-----|

| Yes | [__] | No | [X] |
|-----|------|----|-----|

----

**Item      1. Financial Statements**

| Financial                Statements (Unaudited)                                                                                             |   | Page   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                        |   |   |
| Consolidated                Condensed Balance Sheets                                                                                        |   | F-1    |
| Consolidated                Condensed Statements of Operations                                                                              |   | F-2    |
| Consolidated                Condensed Statements of Comprehensive Income (Loss)                                                             |   | F-3    |
| Consolidated                Condensed Statements of Cash Flows                                                                              |   | F-4    |
| Consolidated                Condensed Statements of Mandatorily Redeemable Preferred Stock and                Stockholders Equity (Deficit) |   | F-5    |
| Notes                to Consolidated Condensed Financial Statements                                                                         |   | F-6    |

----

| **Jacobs                Financial Group, Inc.**                                                                                                                                                                                      |   |                                 |        |   |                            |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|-------------|--------|---------------------------------|--------|
| **Consolidated                Condensed Balance Sheets (Unaudited)**                                                                                                                                                                 |   |                                 |        |   |                            |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |
|                                                                                                                                                                                                                                 |   | **November                30, 2007** |        |   | **May                31, 2007** |   |
| **ASSETS**                                                                                                                                                                                                                           |   |                                 |        |   |                            |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |
| **Investments                and Cash:**                                                                                                                                                                                             |   |                                 |        |   |                            |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |
| Bonds                available for sale, at market value                                                                                                                                                                             |   | $                                    | 830,150     |   |                            | $      | - |   |
| (amortized                cost - 11/30/07 $828,653)                                                                                                                                                                                  |   |                                 |        |   |                            |   |   |   |
| Bonds                held to maturity, at amortized costs                                                                                                                                                                            |   |                                 | 1,171,534   |   |                            |   | 2,316,875 |   |
| (market                value - 11/30/07 $1,176,974; 05/31/07 $2,308,003)                                                                                                                                                             |   |                                 |        |   |                            |   |   |   |
| Mortgage-back                securities held to maturity, at amortized costs                                                                                                                                                         |   |                                 | 1,544,110   |   |                            |   | 1,369,411 |   |
| (market                value - 11/30/07 $1,557,355; 05/31/07 $1,367,365)                                                                                                                                                             |   |                                 |        |   |                            |   |   |   |
| Short-term                investments, at cost (approximates market value)                                                                                                                                                           |   |                                 | 543,471     |   |                            |   | 335,729 |   |
| Cash                                                                                                                                                                                                                                 |   |                                 | 762,012     |   |                            |   | 25,298 |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| **Total                Investments and Cash**                                                                                                                                                                                        |   |                                 | 4,851,277   |   |                            |   | 4,047,313 |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| Investment                income due and accrued                                                                                                                                                                                     |   |                                 | 33,950      |   |                            |   | 35,294 |   |
| Premiums                and other accounts receivable                                                                                                                                                                                |   |                                 | 41,105      |   |                            |   | 38,668 |   |
| Deferred                policy acquisition costs                                                                                                                                                                                     |   |                                 | 48,013      |   |                            |   | 52,365 |   |
| Furniture                and equipment, net of accumulated depreciation of $118,060 and $113,919,                respectively                                                                                                        |   |                                 | 19,487      |   |                            |   | 23,628 |   |
| Note                receivable                                                                                                                                                                                                       |   |                                 | 50,000      |   |                            |   | - |   |
| Other                assets                                                                                                                                                                                                          |   |                                 | 437,398     |   |                            |   | 22,801 |   |
| Intangible                assets                                                                                                                                                                                                     |   |                                 | 150,000     |   |                            |   | 150,000 |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| **TOTAL                ASSETS**                                                                                                                                                                                                      |   | $                                    | 5,631,230   |   |                            | $      | 4,370,069 |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY (DEFICIT)**                                                                                                                                                                    |   |                                 |        |   |                            |   |   |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| Reserve                for losses and loss expenses                                                                                                                                                                                  |   | $                                    | 162,763     |   |                            | $      | 110,784 |   |
| Reserve                for unearned premiums                                                                                                                                                                                         |   |                                 | 165,603     |   |                            |   | 144,188 |   |
| Advance                premiums                                                                                                                                                                                                      |   |                                 | -           |   |                            |   | 127,034 |   |
| Accrued                expenses and professional fees                                                                                                                                                                                |   |                                 | 174,138     |   |                            |   | 547,965 |   |
| Accounts                payable                                                                                                                                                                                                      |   |                                 | 230,709     |   |                            |   | 345,895 |   |
| Notes                payable                                                                                                                                                                                                         |   |                                 | 2,689,488   |   |                            |   | 410,136 |   |
| Accrued                interest payable                                                                                                                                                                                              |   |                                 | 57,438      |   |                            |   | 16,095 |   |
| Other                liabilities                                                                                                                                                                                                     |   |                                 | 348,722     |   |                            |   | 511,751 |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| **Total                Liabilities**                                                                                                                                                                                                 |   |                                 | 3,828,861   |   |                            |   | 2,213,848 |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| **Series                A Preferred Stock**, $.0001 par value per share; 1 million shares                authorized; 1,497 shares issued and outstanding; stated liquidation                value                of $1,000 per share |   |                                 | 1,529,067   |   |                            |   | 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            |   |                                 | 9,230,567   |   |                            |   | 8,526,059 |   |
|  **Total                Mandatorily Redeemable Preferred Stock**                                                                                                                                                                |   |                                 | 10,759,634  |   |                            |   | 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                                                                                                                                                                                            |   |                                 | 2,168,498   |   |                            |   | 2,082,647 |   |
| Accumulated                deficit                                                                                                                                                                                                   |   |                                 | (11,142,736 | )      |                            |   | (9,889,098 | ) |
| Accumulated                other comprehensive income                                                                                                                                                                                |   |                                 | 1,261       |   |                            |   | - |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| **Total                Stockholders' Equity (Deficit)**                                                                                                                                                                              |   |                                 | (8,957,265  | )      |                            |   | (7,790,751 | ) |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**                                                                                                                                                              |   | $                                    | 5,631,230   |   |                            | $      | 4,370,069 |   |
|                                                                                                                                                                                                                                 |   |                                 |        |   |                            |   |   |   |

----

| **Jacobs                Financial Group, Inc,**                                |   |                                  |        |   |                                |   |        |     |   |   |        |   |
|--------------------------------------------------------------------------------|--------|---------------------------------------|-------------|--------|-------------------------------------|--------|-------------|----------|--------|--------|-------------|--------|
| **Consolidated                Condensed Statements of Operations (Unaudited)** |   |                                  |        |   |                                |   |        |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |
|                                                                           |   | **Three                Months Ended** |        |   | **Six                Months Ended** |   |
|                                                                           |   | **November                30**        |        |   | **November                30**      |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |
|                                                                           |   | **2007**                              |        |   | **2006**                            |   |        | **2007** |   |   | **2006**    |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |
| **Revenues:**                                                                  |   |                                  |        |   |                                |   |        |     |   |   |        |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |
| Investment                advisory services                                    |   | $                                     | 63,297      |   |                                | $      | 59,803      |     |   | $      | 129,617     |   |   | $ | 133,211 |   |
| Insurance                premiums and commissions                              |   |                                  | 92,372      |   |                                |   | 82,391      |     |   |   | 183,609     |   |   |   | 162,810 |   |
| Net                investment income                                           |   |                                  | 53,221      |   |                                |   | 44,058      |     |   |   | 107,060     |   |   |   | 89,737 |   |
| Net                realized investment gains (losses)                          |   |                                  | (551        | )      |                                |   | -           |     |   |   | (551        | )      |   |   | - |   |
| Other                income                                                    |   |                                  | -           |   |                                |   | 5,195       |     |   |   | -           |   |   |   | 5,195 |   |
| **Total                Revenues**                                              |   |                                  | 208,339     |   |                                |   | 191,447     |     |   |   | 419,735     |   |   |   | 390,953 |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| **Expenses:**                                                                  |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| Incurred                policy losses                                          |   |                                  | 26,664      |   |                                |   | 35,495      |     |   |   | 51,979      |   |   |   | 51,797 |   |
| Insurance                policy acquisition costs                              |   |                                  | 23,158      |   |                                |   | 28,042      |     |   |   | 49,101      |   |   |   | 54,246 |   |
| General                and administrative                                      |   |                                  | 341,846     |   |                                |   | 413,322     |     |   |   | 648,597     |   |   |   | 752,148 |   |
| Mutual                fund costs                                               |   |                                  | 45,178      |   |                                |   | 48,653      |     |   |   | 85,510      |   |   |   | 94,582 |   |
| Depreciation                                                                   |   |                                  | 1,992       |   |                                |   | 2,838       |     |   |   | 4,141       |   |   |   | 5,793 |   |
| **Total                Expenses**                                              |   |                                  | 438,838     |   |                                |   | 528,350     |     |   |   | 839,328     |   |   |   | 958,566 |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| **Net                Income (Loss) from Operations**                           |   |                                  | (230,499    | )      |                                |   | (336,903    | )        |   |   | (419,593    | )      |   |   | (567,613 | ) |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| Interest                expense                                                |   |                                  | (90,719     | )      |                                |   | (27,418     | )        |   |   | (121,711    | )      |   |   | (112,687 | ) |
| Interest                income                                                 |   |                                  | 5,816       |   |                                |   | 1,130       |     |   |   | 5,818       |   |   |   | 12,222 |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| **Net                Income (Loss)**                                           |   |                                  | (315,402    | )      |                                |   | (363,191    | )        |   |   | (535,486    | )      |   |   | (668,078 | ) |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| Accretion                of Mandatorily Redeemable Convertible                 |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |
| Preferred                Stock, including accrued dividends                    |   |                                  | (364,061    | )      |                                |   | (336,175    | )        |   |   | (718,152    | )      |   |   | (654,482 | ) |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| **Net                Income (Loss) Attributable to Common Stockholders**       |   | $                                     | (679,463    | )      |                                | $      | (699,366    | )        |   | $      | (1,253,638  | )      |   | $ | (1,322,560 | ) |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| **Basic                and Dilutive Net Income (Loss) Per Share:**             |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| **Net                Income (Loss) Per Share**                                 |   | $                                     | -           |   |                                | $      | -           |     |   | $      | (0.01       | )      |   | $ | (0.01 | ) |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
|                                                                           |   |                                  |        |   |                                |   |        |     |   |   |        |   |   |   |   |   |
| **Weighted-Average                Shares Outstanding**                         |   |                                  | 157,122,836 |   |                                |   | 156,353,495 |     |   |   | 157,073,792 |   |   |   | 155,641,798 |   |

----

| **Jacobs                Financial Group, Inc,**                                                                |   |                                  |     |   |                                |   |     |     |   |   |       |   |
|----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|----------|--------|-------------------------------------|--------|----------|----------|--------|--------|------------|--------|
| **Consolidated                Condensed Statements of Comprehensive Income (Loss)                (Unaudited)** |   |                                  |     |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |
|                                                                                                           |   | **Three                Months Ended** |     |   | **Six                Months Ended** |   |
|                                                                                                           |   | **November                30**        |     |   | **November                30**      |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |
|                                                                                                           |   | **2007**                              |     |   | **2006**                            |   |     | **2007** |   |   | **2006**   |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |
| **Comprehensive                income (loss):**                                                                |   |                                  |     |   |                                |   |     |     |   |   |       |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |
| Net                income (loss) attributable to common shareholders                                           |   | $                                     | (679,463 | )      |                                | $      | (699,366 | )        |   | $      | (1,253,638 | )      |   | $ | (1,322,560 | ) |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |   |   |   |   |
| **Other                comprehensive income (loss):**                                                          |   |                                  |     |   |                                |   |     |     |   |   |       |   |   |   |   |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |   |   |   |   |
| Unrealized                (depreciation) appreciation of investments                                           |   |                                  | 1,261    |   |                                |   | -        |     |   |   | 1,261      |   |   |   | - |   |
|                                                                                                           |   |                                  |     |   |                                |   |     |     |   |   |       |   |   |   |   |   |
| **Comprehensive                income (loss) attributable to common stockholders**                             |   | $                                     | (678,202 | )      |                                | $      | (699,366 | )        |   | $      | (1,252,377 | )      |   | $ | (1,322,560 | ) |

----

| **Jacobs                Financial Group, Inc,**                                                        |   |                                               |       |   |                                             |   |     |     |   |   |       |   |
|--------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|------------|--------|--------------------------------------------------|--------|----------|----------|--------|--------|------------|--------|
| **Consolidated                Condensed Statement of Cash Flows (Unaudited)**                          |   |                                               |       |   |                                             |   |     |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |
|                                                                                                   |   | **Three                Months Ended November 30,** |       |   | **Six                Months Ended November 30,** |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |
|                                                                                                   |   | **2007**                                           |       |   | **2006**                                         |   |     | **2007** |   |   | **2006**   |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES**                                                |   |                                               |       |   |                                             |   |     |     |   |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |
| Net                Income (Loss)                                                                       |   | $                                                  | (315,402   | )      |                                             | $      | (363,191 | )        |   | $      | (535,486   | )      |   | $ | (668,078 | ) |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| Adjustments                to reconcile net income (loss) to                                           |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| net                cash provided by (used in) operating activities:                                    |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| Unearned                premium                                                                        |   |                                               | (57,946    | )      |                                             |   | (61,566  | )        |   |   | (105,619   | )      |   |   | (56,164 | ) |
| Stock                option expense                                                                    |   |                                               | 28,593     |   |                                             |   | 57,867   |     |   |   | 57,186     |   |   |   | 115,735 |   |
| Stock                issued (or to be issued) in connection with financing                arrangements |   |                                               | 25,761     |   |                                             |   | -        |     |   |   | 28,187     |   |   |   | - |   |
| Provision                for loss reserves                                                             |   |                                               | 26,664     |   |                                             |   | 35,495   |     |   |   | 51,979     |   |   |   | 51,797 |   |
| Amortization                of premium                                                                 |   |                                               | 3,561      |   |                                             |   | 10,684   |     |   |   | 6,951      |   |   |   | 18,170 |   |
| Depreciation                                                                                           |   |                                               | 1,992      |   |                                             |   | 2,837    |     |   |   | 4,141      |   |   |   | 5,793 |   |
| Premium                and other receivables                                                           |   |                                               | 909        |   |                                             |   | (3,450   | )        |   |   | (2,437     | )      |   |   | (3,514 | ) |
| Accretion                of discount                                                                   |   |                                               | (3,137     | )      |                                             |   | (5,645   | )        |   |   | (6,172     | )      |   |   | (11,184 | ) |
| Investment                income due and accrued                                                       |   |                                               | 557        |   |                                             |   | (21,552  | )        |   |   | 1,344      |   |   |   | (74,580 | ) |
| Realized                (gain) loss on sale of securities                                              |   |                                               | 551        |   |                                             |   | -        |     |   |   | 551        |   |   |   | - |   |
| Deferred                policy acquisition costs                                                       |   |                                               | 14,543     |   |                                             |   | 20,883   |     |   |   | 4,352      |   |   |   | 19,084 |   |
| Change                in operating assets and liabilities:                                             |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
|  Other                assets                                                                      |   |                                               | (397,733   | )      |                                             |   | (9,527   | )        |   |   | (389,833   | )      |   |   | 16,861 |   |
|  Accounts                payable and cash overdraft                                               |   |                                               | (61,173    | )      |                                             |   | (11,615  | )        |   |   | (115,186   | )      |   |   | (94,269 | ) |
|  Accrued                expenses and other liabilities                                            |   |                                               | (510,996   | )      |                                             |   | 88,243   |     |   |   | (495,513   | )      |   |   | 179,782 |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **Net                cash flows from (used in) operating activities**                                  |   |                                               | (1,243,256 | )      |                                             |   | (260,537 | )        |   |   | (1,495,555 | )      |   |   | (500,567 | ) |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES**                                                |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| Advances                to related party                                                               |   |                                               | -          |   |                                             |   | -        |     |   |   | -          |   |   |   | (65,081 | ) |
| Repayments                from related party                                                           |   |                                               | -          |   |                                             |   | -        |     |   |   | -          |   |   |   | 127,227 |   |
| Short-term                loan                                                                         |   |                                               | (50,000    | )      |                                             |   | -        |     |   |   | (50,000    | )      |   |   | - |   |
| (Increase)                decrease in short-term investments                                           |   |                                               | (80,614    | )      |                                             |   | 75,233   |     |   |   | (205,872   | )      |   |   | (95,008 | ) |
| Costs                of bonds acquired                                                                 |   |                                               | -          |   |                                             |   | -        |     |   |   | -          |   |   |   | (100,000 | ) |
| Costs                of mortgaged-backed securities acquired                                           |   |                                               | (320,860   | )      |                                             |   | (270,288 | )        |   |   | (320,860   | )      |   |   | (270,288 | ) |
| Purchase                of equity securities                                                           |   |                                               | (25,000    | )      |                                             |   | -        |     |   |   | (25,000    | )      |   |   | - |   |
| Redemption                of bonds at maturity                                                         |   |                                               | 150,000    |   |                                             |   | -        |     |   |   | 150,000    |   |   |   | - |   |
| Sale                of securities available for sale                                                   |   |                                               | 169,330    |   |                                             |   | -        |     |   |   | 169,330    |   |   |   | - |   |
| Repayment                of mortgage-backed securities                                                 |   |                                               | 71,655     |   |                                             |   | 170,054  |     |   |   | 140,319    |   |   |   | 264,296 |   |
| Purchase                of furniture and equipment                                                     |   |                                               | -          |   |                                             |   | (2,622   | )        |   |   | -          |   |   |   | (3,957 | ) |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **Net                cash flows from (used in) investing activities**                                  |   |                                               | (85,489    | )      |                                             |   | (27,623  | )        |   |   | (142,083   | )      |   |   | (142,811 | ) |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**                                                |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| Proceeds                from related party debt                                                        |   |                                               | -          |   |                                             |   | 78,550   |     |   |   | 127,200    |   |   |   | 78,550 |   |
| Repayment                of related party debt                                                         |   |                                               | (127,200   | )      |                                             |   | (65,926  | )        |   |   | (142,963   | )      |   |   | (71,655 | ) |
| Proceeds                from borrowings                                                                |   |                                               | 2,300,000  |   |                                             |   | 50,000   |     |   |   | 2,450,000  |   |   |   | 300,000 |   |
| Repayment                of borrowings                                                                 |   |                                               | (139,649   | )      |                                             |   | (50,000  | )        |   |   | (154,885   | )      |   |   | (50,000 | ) |
| Proceeds                from issuance of Series A preferred stock                                      |   |                                               | 30,000     |   |                                             |   | 52,000   |     |   |   | 70,000     |   |   |   | 238,000 |   |
| Proceeds                from issuance of Series B preferred stock                                      |   |                                               | -          |   |                                             |   | 239,900  |     |   |   | 25,000     |   |   |   | 239,900 |   |
| Redemption                of Series B preferred stock                                                  |   |                                               | -          |   |                                             |   | (52,000  | )        |   |   | -          |   |   |   | (62,477 | ) |
| Proceeds                from issuance of common stock                                                  |   |                                               | -          |   |                                             |   | 10,100   |     |   |   | -          |   |   |   | 10,100 |   |
| Proceeds                from exercise of common stock warrants                                         |   |                                               | -          |   |                                             |   | 1,500    |     |   |   | -          |   |   |   | 1,500 |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **Net                cash flows from financing activities**                                            |   |                                               | 2,063,151  |   |                                             |   | 264,124  |     |   |   | 2,374,352  |   |   |   | 683,918 |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **NET                INCREASE (DECREASE) IN CASH**                                                     |   |                                               | 734,406    |   |                                             |   | (24,036  | )        |   |   | 736,714    |   |   |   | 40,540 |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **CASH                AT BEGINNING OF PERIOD**                                                         |   |                                               | 27,606     |   |                                             |   | 64,576   |     |   |   | 25,298     |   |   |   | - |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **CASH                AT END OF PERIOD**                                                               |   | $                                                  | 762,012    |   |                                             | $      | 40,540   |     |   | $      | 762,012    |   |   | $ | 40,540 |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| **SUPPLEMENTAL                DISCLOSURES**                                                            |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| Interest                paid                                                                           |   | $                                                  | 19,025     |   |                                             | $      | 14,775   |     |   | $      | 41,531     |   |   | $ | 26,182 |   |
| Income                taxes paid                                                                       |   |                                               | -          |   |                                             |   | -        |     |   |   | -          |   |   |   | - |   |
|                                                                                                   |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
| Non-cash                investing and financing transaction:                                           |   |                                               |       |   |                                             |   |     |     |   |   |       |   |   |   |   |   |
|  Assumption                of accounts payable by related party                                   |   |                                               | -          |   |                                             |   | 365,000  |     |   |   | -          |   |   |   | 365,000 |   |
|  Additional                consideration paid for issuance of debt                                |   |                                               | 25,761     |   |                                             |   | -        |     |   |   | 28,187     |   |   |   | - |   |
|  Reclassification                of bonds held-to-maturity to bonds available for sale            |   |                                               | 998,280    |   |                                             |   |     |     |   |   | 998,280    |   |   |   |   |   |

----

| **Jacobs                Financial Group, Inc.**                                                                                                             |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|-------------------------------------------|--------|-----------|-----------------|--------|--------|------------|--------|--------|---------------------------------------------------|-----------|--------|-----------------|--------|-------------|-------------------|--------|--------|-----------------------------|--------|--------|----------------------------------|-----------|--------|
| **Consolidated                Condensed Statement of Mandatorily Redeemable Preferred Stock and                Stockholders' Equity (Deficit) (Unaudited)** |   |                                      |   |   |
| **For                the Three Month Period Ended November 30, 2007**                                                                                       |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   | **Stockholders'                Equity (Deficit)** |      |
|                                                                                                                                                        |   | **Series                A**               |   |   | **Series                B**               |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |
|                                                                                                                                                        |   | **Mandatorily                Redeemable** |   |   | **Mandatorily                Redeemable** |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        | **Accumulated**   |   |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      | **Convertible** |   |   |       |   |   |                                              |      |   | **Additional**  |   |        |              |   |   | **Other**    |   |   |
|                                                                                                                                                        |   | **Preferred                Stock**        |   |   | **Preferred                Stock**        |   |      |            |   |   |       |   |   | **Paid-In**                                       |      |   | **Accumulated** |   |        | **Comprehensive** |   |   |
|                                                                                                                                                        |   | **Shares**                                |   |   | **Amount**                                |   |      | **Shares**      |   |   | **Amount** |   |   | **Shares**                                        |      |   | **Amount**      |   |        | **Capital**       |   |   | **Deficit**                 |   |   | **Income                (Loss)** |      |   | **Total** |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |
| **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 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                of Series A and B Preferred Stock and common stock                                                                                  |   |                                      | 30     |   |                                      |   | 30,000    |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -                           |   |   |                             | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                of common stock as additional consideration for financing                arrangements                                               |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -                           |   |   |                             | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion                of mandatorily redeemable convertible preferred stock                                                                              |   |                                      | -      |   |                                      |   | 3,984     |            |   |   | -          |   |   |                                              | 127,154   |   |            |   | -           |              |   |   | -                           |   |   |                             | -         |   |   |   | (131,138 | ) |   |   | - |   |   |   | (131,138 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accrued                dividends of mandatorily redeemable convertible preferred                stock                                                       |   |                                      | -      |   |                                      |   | 15,438    |            |   |   | -          |   |   |                                              | 217,485   |   |            |   | -           |              |   |   | -                           |   |   |                             | -         |   |   |   | (232,923 | ) |   |   |   |   |   |   | (232,923 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expense                of common shares to be issued in connection with financing                arrangements                                               |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -                           |   |   |                             | 25,761    |   |   |   | - |   |   |   | - |   |   |   | 25,761 |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                stock option expense                                                                                                                  |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -                           |   |   |                             | 28,593    |   |   |   | - |   |   |   | - |   |   |   | 28,593 |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                net gain on available for sale securities                                                                                         |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -                           |   |   |                             | -         |   |   |   | - |   |   |   | 1,261 |   |   |   | 1,261 |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss), three month period ended November 30, 2007                                                                                |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -                           |   |   |                             | -         |   |   |   | (315,402 | ) |   |   | - |   |   |   | (315,402 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance,                November 30, 2007**                                                                                                               |   |                                      | 1,497  |   |                                      | $      | 1,529,067 |            |   |   | 9,621.940  |   |   | $                                                 | 9,230,567 |   |            |   | 157,122,836 |              |   | $      | 15,712                      |   |   | $                                | 2,168,498 |   |   | $ | (11,142,736 | ) |   | $ | 1,261 |   |   | $ | (8,957,265 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |                        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **Jacobs                Financial Group, Inc.**                                                                                                             |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|-------------------------------------------|--------|-----------|-----------------|--------|--------|------------|--------|--------|---------------------------------------------------|-----------|--------|-----------------|--------|-------------|-------------------|--------|--------|-------------|--------|--------|----------------------------------|-----------|--------|
| **Consolidated                Condensed Statement of Mandatorily Redeemable Preferred Stock and                Stockholders' Equity (Deficit) (Unaudited)** |   |                                      |   |   |
| **For                the Six Month Period Ended November 30, 2007**                                                                                         |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   | **Stockholders'                Equity (Deficit)** |      |
|                                                                                                                                                        |   | **Series                A**               |   |   | **Series                B**               |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |
|                                                                                                                                                        |   | **Mandatorily                Redeemable** |   |   | **Mandatorily                Redeemable** |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        | **Accumulated**   |   |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      | **Convertible** |   |   |       |   |   |                                              |      |   | **Additional**  |   |        |              |   |   | **Other**   |   |   |                             |      |
|                                                                                                                                                        |   | **Preferred                Stock**        |   |   | **Preferred                Stock**        |   |      |            |   |   |       |   |   | **Paid-In**                                       |      |   | **Accumulated** |   |        | **Comprehensive** |   |   |
|                                                                                                                                                        |   | **Shares**                                |   |   | **Amount**                                |   |      | **Shares**      |   |   | **Amount** |   |   | **Shares**                                        |      |   | **Amount**      |   |        | **Capital**       |   |   | **Deficit** |   |   | **Income                (Loss)** |      |   | **Total** |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |
| **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                                                                                  |   |                                      | 70     |   |                                      |   | 70,000    |            |   |   | 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                                                                              |   |                                      | -      |   |                                      |   | 7,914     |            |   |   | -          |   |   |                                              | 252,072   |   |            |   | -           |              |   |   | -           |   |   |                             | -         |   |   |   | (259,986 | ) |   |   | - |   |   |   | (259,986 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accrued                dividends of mandatorily redeemable convertible preferred                stock                                                       |   |                                      | -      |   |                                      |   | 30,240    |            |   |   | -          |   |   |                                              | 427,926   |   |            |   | -           |              |   |   | -           |   |   |                             | -         |   |   |   | (458,166 | ) |   |   | - |   |   |   | (458,166 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expense                of common shares to be issued in connection with financing                arrangements                                               |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -           |   |   |                             | 26,631    |   |   |   | - |   |   |   | - |   |   |   | 26,631 |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                stock option expense                                                                                                                  |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -           |   |   |                             | 57,186    |   |   |   | - |   |   |   | - |   |   |   | 57,186 |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                net gain on available for sale securities                                                                                         |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -           |   |   |                             | -         |   |   |   | - |   |   |   | 1,261 |   |   |   | 1,261 |   |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss), six month period ended November 30, 2007                                                                                  |   |                                      | -      |   |                                      |   | -         |            |   |   | -          |   |   |                                              | -         |   |            |   | -           |              |   |   | -           |   |   |                             | -         |   |   |   | (535,486 | ) |   |   | - |   |   |   | (535,486 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance,                November 30, 2007**                                                                                                               |   |                                      | 1,497  |   |                                      | $      | 1,529,067 |            |   |   | 9,621.940  |   |   | $                                                 | 9,230,567 |   |            |   | 157,122,836 |              |   | $      | 15,712      |   |   | $                                | 2,168,498 |   |   | $ | (11,142,736 | ) |   | $ | 1,261 |   |   | $ | (8,957,265 | ) |
|                                                                                                                                                        |   |                                      |   |   |                                      |   |      |            |   |   |       |   |   |                                              |      |   |            |   |        |              |   |   |        |   |   |                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

*Reclassifications*

*Liquidity      and Going Concern*

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**Note      B – Recent Accounting Pronouncements**

*Accounting for Nonmonetary Transactions*

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

|                                    |   | November                30, 2007 |    |
|-----------------------------------------|--------|----------------------------------|---------|
|                                    |   | Amortized                Cost    |    |   | Gross                Unrealized Gains |   |   | Gross                Unrealized Losses |   |   | Fair                Market Value |   |
| U.S.                government agencies |   | $                                | 828,653 |   |   | $ | 1,497 |   |   | $ | - |   |   | $ | 830,150 |   |
| Equity                securities        |   | $                                | 25,000  |   |   |   | - |   |   |   | 236 |   |   |   | 24,764 |   |
|                                    |   | $                                | 853,653 |   |   | $ | 1,497 |   |   | $ | 236 |   |   | $ | 854,914 |   |

| Proceeds                from sale of security  |   | $      | 169,330  |   |
|------------------------------------------------|--------|--------|----------|--------|
| Amortized                cost of security sold |   |   | (169,881 | )      |
| Loss                on sale of security        |   | $      | (551     | )      |

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

| Unsecured                demand notes payable to individuals; interest rate fixed @                10.00%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $      | 95,000    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |      |   |
| Unsecured                note payable to individuals maturing December 31, 2007; interest                payable                calendar quarterly; interest rate fixed @ 10.00%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   | 49,985    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |      |   |
| Unsecured                notes payable (bridge-financing) to a group of individuals due in                full                upon consummation by 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                10, 2008), accrued interest-to-date shall be payable, with quarterly                installments of principal and interest in the amount of $149,437                commencing June 10, 2008; interest rate fixed @ 10.00%                                                                                                                                 |   |   | 2,325,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |      |   |
| Furthermore,                upon retirement of note upon consummation of a qualified equity offering,                the Company shall issue 4.65% 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 10, 2008, then the Company shall issue 4.65% of the Company’s                outstanding common shares at such date and shall issue 1.86% of the                Company’s outstanding common shares upon each six-month anniversary date                thereof until retirement of the notes. (See Note I-Subsequent                Events) |   |   |      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |      |   |
| Unsecured                term note payable to commercial bank in the original amount of $250,000                and payable in equal monthly payments of $5,738; interest rate fixed                @                13.25%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 219,503   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $      | 2,689,488 |   |

| 2008                (including demand notes) |   | $      | 371,198   |   |
|----------------------------------------------|--------|--------|-----------|--------|
| 2009                                         |   |   | 444,761   |   |
| 2010                                         |   |   | 493,076   |   |
| 2011                                         |   |   | 546,695   |   |
| 2012                                         |   |   | 545,818   |   |
| 2013                                         |   |   | 287,940   |   |
|                                         |   | $      | 2,689,488 |   |

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**Note      G – Other Liabilities**

**Note      H – Mandatorily Redeemable Preferred Stock and Common      Stock**

**Note      I – Subsequent Events**

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

----

**Jacobs      Financial Group, Inc.**

**NOTES      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**Note      J – Segment Reporting**

|                                         |   | **Three-Month                Period Ended**   |     |
|----------------------------------------------|--------|-----------------------------------------------|----------|
| **Industry                Segment**          |   | **November                30,**** 2007** |     |   | **November                30,****2006** |   |
| **Revenues:**                                |   |                                          |     |   |   |   |
|  Investment                advisory     |   | $                                             | 63,299   |   |   | $ | 66,128 |   |
|  Surety                insurance        |   |                                          | 145,042  |   |   |   | 126,449 |   |
|  Corporate                              |   |                                          | 5,814    |   |   |   | - |   |
|  Total                revenues          |   | $                                             | 214,155  |   |   | $ | 192,577 |   |
|                                         |   |                                          |     |   |   |   |   |   |
| **Net                Income (Loss):**        |   |                                          |     |   |   |   |   |   |
|  Investment                advisory     |   | $                                             | (55,566  | ) |   | $ | (105,644 | ) |
|  Surety                insurance        |   |                                          | 10,388   |   |   |   | (25,084 | ) |
|  Corporate                              |   |                                          | (270,224 | ) |   |   | (232,463 | ) |
|  Total                net income (loss) |   | $                                             | (315,402 | ) |   | $ | (363,191 | ) |
|                                         |   |                                          |     |   |   |   |   |   |
|                                         |   | **Six-Month                Period Ended**     |     |
| **Industry                Segment**          |   | **November                30,**** 2007** |     |   | **November                30,****2006** |   |
| **Revenues:**                                |   |                                          |     |   |   |   |   |   |
|  Investment                advisory     |   | $                                             | 129,622  |   |   | $ | 150,628 |   |
|  Surety                insurance        |   |                                          | 290,117  |   |   |   | 252,547 |   |
|  Corporate                              |   |                                          | 5,814    |   |   |   | - |   |
|  Total                revenues          |   | $                                             | 425,553  |   |   | $ | 403,175 |   |
|                                         |   |                                          |     |   |   |   |   |   |
| **Net                Income (Loss):**        |   |                                          |     |   |   |   |   |   |
|  Investment                advisory     |   | $                                             | (119,671 | ) |   | $ | (247,718 | ) |
|  Surety                insurance        |   |                                          | 42,861   |   |   |   | (18,236 | ) |
|  Corporate                              |   |                                          | (458,676 | ) |   |   | (402,124 | ) |
|  Total                net income (loss) |   | $                                             | (535,486 | ) |   | $ | (668,078 | ) |

----

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

***Recent      Developments and Future Direction of Company***

----

***Results      of Operations for the Three-Month Period Ended November 30,      2007***

|                                 |   | Three-Month                Period Ended |    |
|--------------------------------------|--------|-----------------------------------------|---------|
|                                 |   | November                30,             |    |
|                                 |   | 2007                                    |    |   | 2006 |   |
| Premium                earned        |   | $                                       | 89,041  |   |   | $ | 81,138 |   |
| Net                investment income |   |                                    | 52,670  |   |   |   | 44,058 |   |
| Commissions                earned    |   |                                    | 3,331   |   |   |   | 1,253 |   |
| Total                                |   | $                                       | 145,042 |   |   | $ | 126,449 |   |

----

|                                                  |   | Three-Month                Period Ended |    |   |   |   |
|-------------------------------------------------------|--------|-----------------------------------------|---------|--------|--------|--------|
|                                                  |   | November                30,             |    |   |   |   |
|                                                  |   | 2007                                    |    |   | 2006   |   |   | Difference |   |
| Salaries                and related costs             |   | $                                       | 199,158 |   |   | $      | 211,632 |   |   | $ | (12,474 | ) |
| General                office expense                 |   |                                    | 26,246  |   |   |   | 28,185 |   |   |   | (1,939 | ) |
| Legal                and other professional fees      |   |                                    | 34,671  |   |   |   | 74,194 |   |   |   | (39,523 | ) |
| Audit,                accounting and related services |   |                                    | 32,693  |   |   |   | 44,962 |   |   |   | (12,269 | ) |
| Travel,                meals and entertainment        |   |                                    | 22,816  |   |   |   | 18,234 |   |   |   | 4,582 |   |
| Other                general and administrative       |   |                                    | 26,262  |   |   |   | 36,115 |   |   |   | (9,853 | ) |
|                                                  |   |                                    |    |   |   |   |   |   |   |   |   |   |
| Total                general and administrative       |   | $                                       | 341,846 |   |   | $      | 413,322 |   |   | $ | (71,476 | ) |

----

** **
** **
** **

----

***Results      of Operations for the Six-Month Period Ended November 30,      2007***

----

|                                 |   | Six-Month                Period Ended |    |
|--------------------------------------|--------|---------------------------------------|---------|
|                                 |   | November                30,           |    |
|                                 |   | 2007                                  |    |   | 2006 |   |
| Premium                earned        |   | $                                     | 173,579 |   |   | $ | 156,958 |   |
| Net                investment income |   |                                  | 106,509 |   |   |   | 89,737 |   |
| Commissions                earned    |   |                                  | 10,030  |   |   |   | 5,852 |   |
| Total                                |   | $                                     | 290,118 |   |   | $ | 252,547 |   |

----

|                                                  |   | Six-Month                Period Ended |    |   |   |   |
|-------------------------------------------------------|--------|---------------------------------------|---------|--------|--------|--------|
|                                                  |   | November                30,           |    |   |   |   |
|                                                  |   | 2007                                  |    |   | 2006   |   |   | Difference |   |
| Salaries                and related costs             |   | $                                     | 368,581 |   |   | $      | 400,665 |   |   | $ | (32,084 | ) |
| General                office expense                 |   |                                  | 52,297  |   |   |   | 56,049 |   |   |   | (3,752 | ) |
| Legal                and other professional fees      |   |                                  | 75,553  |   |   |   | 101,506 |   |   |   | (25,953 | ) |
| Audit,                accounting and related services |   |                                  | 55,646  |   |   |   | 69,970 |   |   |   | (14,324 | ) |
| Travel,                meals and entertainment        |   |                                  | 33,249  |   |   |   | 49,593 |   |   |   | (16,344 | ) |
| Other                general and administrative       |   |                                  | 63,271  |   |   |   | 74,365 |   |   |   | (11,094 | ) |
|                                                  |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Total                general and administrative       |   | $                                     | 648,597 |   |   | $      | 752,148 |   |   | $ | (103,551 | ) |

----

** **
** **
** **

----

***Critical      Accounting Policies and Estimates***

----

***Analysis      of Liquidity, Capital Resources and Financial      Position***

----

----

**Item      3.  Controls and Procedures**

***Evaluation      of Internal and Disclosure Controls***

**PART      II – OTHER INFORMATION**

**Item      1. Legal Proceedings**

**Item      2. Unregistered Sales of Equity Securities**

**Item      3. Defaults upon Senior Securities**

----

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

**Item      5. Other Information**

**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 1350, 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 1350, as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002 |
| 99.1   | Form                of Subscription Agreement and Promissory Note (2)                                                                                                                                         |
|   | (1)                                                                                                                                                                                                           | Incorporated                by reference to the Company’s Current Report on form 8-K dated December                29, 2005. |
|   | (2)                                                                                                                                                                                                           | Incorporated                by reference to the Company’s Current Report on form 8-K dated September                14, 2007. |

**SIGNATURES**

| Date:                January 22, 2008 | JACOBS                FINANCIAL GROUP, INC. |
|---------------------------------------|---------------------------------------------|
|                                  | (Registrant)                                |
|                                  |                                        |
|                                  | /s/John                M. Jacobs            |
|                                  | John                M. Jacobs, President    |