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

                                   FORM 10-QSB

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

                For the quarterly period ended November 30, 2006

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

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


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

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

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                                               Yes [x]  No [  ]

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

                                               Yes [  ] No [x]

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  156,897,836  common  shares as of
January 5, 2007.

Transitional Small Business Disclosure Format (check one)

                                               Yes [  ] No [x]


<PAGE>


                         PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

                                                                            PAGE
                                                                            ----
       FINANCIAL STATEMENTS (UNAUDITED)

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




















                                       2
<PAGE>
JACOBS FINANCIAL GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>



                                                                                     NOVEMBER 30, 2006          MAY 31, 2006
                                                                                     ------------------       -----------------
ASSETS

  INVESTMENTS AND CASH:

<S>                                                                                  <C>                      <C>
        Bonds held to maturity, at amortized costs                                   $      1,125,219         $     1,029,963
          (market value - 11/30/06 $1,124,283; 05/31/06 $1,024,053)
        Mortgage-back securities held to maturity, at amortized costs                       1,354,098               1,360,778
          (market value - 11/30/06 $1,340,120; 05/31/06 $1,343,108)
        Short-term investments, at cost (approximates market value)                         1,344,909               1,196,111
        Cash                                                                                   40,540                       -
                                                                                     ------------------       -----------------

                                     TOTAL INVESTMENTS AND CASH                             3,864,766               3,586,852


        Investment income due and accrued                                                      23,144                  20,958
        Premiums and other accounts receivable                                                 51,288                  47,774
        Deferred policy acquisition costs                                                      51,315                  70,399
        Furniture and equipment, net of accumulated depreciation of
        $107,293 and $101,500, respectively                                                    28,204                  30,040
        Due from related party                                                                      -                 361,010
        Other assets                                                                           17,002                  33,863
        Intangible assets                                                                     150,000                 150,000
                                                                                     ------------------       -----------------
                                                   TOTAL ASSETS                      $      4,185,719         $     4,300,896
                                                                                     ==================       =================


LIABILITIES AND STOCKHOLDERS' EQUITY

        Reserve for losses and loss expenses                                          $        63,708         $        11,911
        Reserve for unearned premiums                                                         137,452                 193,616
        Cash Overdraft                                                                              -                 127,985
        Accrued expenses and professional fees                                                333,890                 614,034
        Accounts payable                                                                      312,337                 278,621
        Notes payable                                                                         470,171                 158,232
        Accrued interest payable                                                               49,297                  41,942
        Other liabilities                                                                     483,402                 413,773
                                                                                     ------------------       -----------------
                                                  TOTAL LIABILITIES                         1,850,257               1,840,114


     Series A  preferred  stock,  $.0001 par value per share;  1 million  shares
     authorized; 1,347 shares issued and outstanding                                        1,305,555               1,035,841

     Series B  preferred  stock,  $.0001 par value per share;  9,941.341  shares
     authorized; 9,286.940 shares issued and outstanding                                    7,580,377               6,780,186
                                                                                     ------------------       -----------------
                           TOTAL MANDATORILY REDEEMABLE PREFERRED STOCK                     8,885,932               7,816,027


STOCKHOLDERS' EQUITY (DEFICIT)

Common stock, $.0001 par value per share; 490 million shares authorized;
 156,687,837 shares issued and outstanding                                                     15,669                  15,494
Additional paid in capital                                                                  1,984,089               1,856,929
Accumulated deficit                                                                        (8,550,228)             (7,227,668)
                                                                                     ------------------       -----------------

                            TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                           (6,550,470)             (5,355,245)
                                                                                     ------------------       -----------------
                       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          $      4,185,719         $     4,300,896
                                                                                     ==================       =================
</TABLE>
                            See accompanying notes.
                                      F-1

<PAGE>

JACOBS FINANCIAL GROUP, INC,
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>


                                                              THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                                  NOVEMBER 30,                           NOVEMBER 30,

                                                             2006             2005                 2006            2005
                                                        --------------    -------------       ---------------   -------------

REVENUES:
<S>                                                     <C>               <C>                   <C>             <C>
 Investment advisory services                           $     59,803      $    53,945           $  133,211      $  104,062
 Agency commissions                                            7,125              (73)              36,091           9,437
 Insurance premiums                                           81,138                -              156,958               -
 Net investment income                                        44,058                -               89,737               -
 Other income                                                  6,325                -               17,417               -
                                                        --------------    -------------       ---------------   -------------
                                   TOTAL REVENUES            198,449           53,872              433,414         113,499


EXPENSES:

 Incurred policy losses                                       35,495                -               51,797               -
 Insurance policy acquisition costs                           28,042                -               54,246               -
 General and administrative                                  419,194          305,192              782,387         539,548
 Mutual fund costs                                            48,653           43,186               94,582          79,633
 Interest                                                     27,418          119,874              112,687         204,497
 Depreciation and amortization                                 2,838            1,475                5,793           2,950
                                                        --------------    -------------       ---------------   -------------
                                   TOTAL EXPENSES            561,640          469,727            1,101,492         826,628
                                                        --------------    -------------       ---------------   -------------

                                   NET INCOME (LOSS)        (363,191)        (415,855)            (668,078)       (713,129)
                                                        --------------    -------------       ---------------   -------------

Accretion of Mandatorily Redeemable Convertible
 Preferred Stock, including accrued dividends               (336,175)               -             (654,482)              -
                                                        --------------    -------------       ---------------   -------------

                                   NET INCOME (LOSS)
                ATTRIBUTABLE TO COMMON STOCKHOLDERS    $    (699,366)    $   (415,855)         $(1,322,560)     $ (713,129)
                                                       ===============   ==============       ==============    =============


BASIC AND DILUTIVE NET INCOME (LOSS) PER SHARE:

 NET INCOME (LOSS) PER SHARE                           $           -     $          -          $     (0.01)     $    (0.01)
                                                       ===============   ==============       ==============    =============


 WEIGHTED-AVERAGE SHARES OUTSTANDING                     156,353,495      122,663,860          155,641,798       122,663,860
                                                       ===============   ==============       ==============    =============

</TABLE>

                            See accompanying notes.
                                      F-2
<PAGE>
JACOBS FINANCIAL GROUP, INC,
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED NOVEMBER 30,        SIX MONTHS ENDED NOVEMBER 30,
                                                                      2006             2005                  2006           2005
                                                                ----------------  --------------         ------------  -------------
CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                             <C>               <C>                    <C>           <C>
 Net Income (Loss)                                              $       (363,191) $    (415,855)         $  (668,078)  $   (713,129)

 Adjustments  to reconcile  net income  (loss) to
  net cash  provided by (used in) operating activities:

        Unearned premium                                                 (61,566)             -              (56,164)             -
        Stock option expense                                              57,867                             115,735              -
        Provision for loss reserves                                       35,495              -               51,797              -
        Amortization of premium                                           10,684              -               18,170              -
        Depreciation                                                       2,837          1,475                5,793          2,950
        Premium and other receivables                                     (3,450)          (564)              (3,514)        (6,580)
        Accretion of discount                                             (5,645)             -              (11,184)             -
        Investment income due and accrued                                (21,552)             -              (74,580)             -
        Deferred policy acquisition costs                                 20,883              -               19,084              -
        Change in operating assets and liabilities:
        Other assets                                                      (9,527)           965               16,861         (2,248)
        Accounts payable                                                 (11,615)       (48,569)             (94,269)        28,980
        Accrued expenses and other liabilities                            88,243        111,810              179,782        194,636
                                                                ----------------  --------------         ------------  -------------

                NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES      (260,537)      (350,738)            (500,567)      (495,391)

CASH FLOWS FROM INVESTING ACTIVITIES

 Advances to related party                                                     -                             (65,081)
 Repayments from related party                                                 -                             127,227
 (Increase) decrease in short-term investments                            75,233              -              (95,008)             -
 Costs of bonds acquired                                                       -              -             (100,000)             -
 Costs of mortgaged-backed securities acquired                          (270,288)                           (270,288)
 Repayment of mortgage-backed securities                                 170,054                             264,296
 Purchase of furniture and equipment                                      (2,622)             -               (3,957)             -
                                                                ----------------  --------------         ------------  -------------

                NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES       (27,623)             -             (142,811)             -

CASH FLOWS FROM FINANCING ACTIVITIES

 Proceeds from related party debt                                         78,550        515,450               78,550        838,020
 Repayment of related party debt                                         (65,926)      (277,783)             (71,655)      (429,890)
 Proceeds from short-term borrowings                                      50,000        273,500              300,000        338,500
 Repayment of short-term borrowings                                      (50,000)      (112,500)             (50,000)      (202,500)
 Proceeds from issuance of Series A preferred stock                       52,000              -              238,000              -
 Proceeds from issuance of Series B preferred stock                      239,900                             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                  264,124        398,667              683,918        544,130

NET INCREASE (DECREASE) IN CASH                                          (24,036)        47,929               40,540         48,739

CASH AT BEGINNING OF PERIOD                                               64,576          1,247                    -            437
                                                                ----------------  --------------         ------------  -------------

CASH AT END OF PERIOD                                           $         40,540  $      49,176          $    40,540   $     49,176
                                                                ================  ==============         ============  =============

SUPPLEMENTAL DISCLOSURES

 Interest paid                                                  $         14,775  $     100,484          $    26,182   $    157,582
 Income taxes paid                                                             -              -                    -              -

 Non-cash investing and financing transaction:
  Assumption of accounts payable by related party                        365,000              -              365,000              -
</TABLE>
                            See accompanying notes.
                                      F-3

<PAGE>

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, 2006

<TABLE>
<CAPTION>

                                                                         -----------------------------------------------------------

                                                                                        STOCKHOLDERS' EQUITY (DEFICIT)
                                                       SERIES B
                                  SERIES A       MANDATORILY REDEEMABLE  -----------------------------------------------------------
                           MANDATORILY REDEEMABLE    CONVERTIBLE                              ADDITIONAL
                               PREFERRED STOCK     PREFERRED STOCK                             PAID-IN     ACCUMULATED
                             SHARES      AMOUNT  SHARES     AMOUNT      SHARES      AMOUNT     CAPITAL       DEFICIT        TOTAL
                            -------- ----------  -------   ---------  -----------  --------  ------------  -----------  -----------
<S>                         <C>      <C>         <C>       <C>        <C>          <C>       <C>           <C>          <C>
BALANCE, AUGUST 31, 2006        1,295 $1,236,767 9,085.599 $7,073,090  154,937,837  $ 15,494  $  1,914,797  $(7,850,862)$(5,920,571)

Issuance of common stock
 upon exercise of warrants          -          -         -          -    1,500,000       150         1,350            -       1,500

Issuance of Series A and B
 Preferred Stock and Common
 Stock                             52     52,000   250.000     239,900     250,000        25        10,075            -      10,100

Accretion of mandatorily
 redeemable convertible
 preferred stock                    -      3,774        -     118,026            -         -             -     (121,800)   (121,800)

Accrued dividends of
 mandatorily redeemable
 convertible preferred stock        -     13,014        -     190,644            -         -             -     (203,658)   (203,658)

Redemption of Series B
 Preferred Stock                    -          -   (48.659)   (41,283)           -         -             -      (10,717)    (10,717)

Common stock option expense         -          -        -           -            -         -        57,867            -      57,867

Net Income (loss), three
 month period ended
 November 30, 2006                  -          -        -           -            -         -             -     (363,191)   (363,191)
                             -------- ----------  -------   ---------  -----------  --------  ------------  -----------  -----------

BALANCE, November 30, 2006      1,347 $1,305,555 9,286.940 $7,580,377  156,687,837  $ 15,669  $  1,984,089  $(8,550,228)$(6,550,470)
                             ======== ==========  =======   =========  ===========  ========  ============  ===========  ===========
                             ----------------------------------------  -------------------------------------------------------------

</TABLE>
                            See accompanying notes.
                                      F-4
<PAGE>
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, 2006

<TABLE>
<CAPTION>

                                                                         -----------------------------------------------------------

                                                                                        STOCKHOLDERS' EQUITY (DEFICIT)
                                                       SERIES B
                                  SERIES A       MANDATORILY REDEEMABLE  -----------------------------------------------------------
                           MANDATORILY REDEEMABLE    CONVERTIBLE                              ADDITIONAL
                               PREFERRED STOCK     PREFERRED STOCK                             PAID-IN     ACCUMULATED
                             SHARES      AMOUNT  SHARES     AMOUNT      SHARES      AMOUNT     CAPITAL       DEFICIT        TOTAL
                            -------- ----------  -------   ---------  -----------  --------  ------------  -----------  -----------
<S>                         <C>      <C>         <C>       <C>        <C>          <C>       <C>           <C>          <C>
BALANCE, MAY 31, 2006           1,109 $1,035,841 9,095.599 $6,780,186  154,937,837  $ 15,494  $  1,856,929  $(7,227,668)$(5,355,245)

Issuance of Series A and B
 Preferred Stock and Common
 Stock                            238    238,000   250.000     239,900     250,000        25        10,075            -      10,100

Issuance of common stock
 upon exercise of warrants          -          -         -          -    1,500,000       150         1,350            -       1,500

Accretion of mandatorily
 redeemable convertible
 preferred stock                    -      7,497        -     236,389            -         -             -     (243,886)   (243,886)

Accrued dividends of
 mandatorily redeemable
 convertible preferred stock        -     24,217        -     375,662            -         -             -     (399,879)   (399,879)

Redemption of Series B
 Preferred Stock                    -          -   (58.659)   (51,760)           -         -             -      (10,717)    (10,717)

Common stock option expense         -          -        -           -            -         -       115,735            -     115,735

Net Income (loss), six
 month period ended
 November 30, 2006                  -          -        -           -            -         -             -     (668,078)   (668,078)
                             -------- ----------  -------   ---------  -----------  --------  ------------  -----------  -----------

BALANCE, November 30, 2006      1,347 $1,305,555 9,286.940 $7,580,377  156,687,837  $ 15,669  $  1,984,089  $(8,550,228)$(6,550,470)
                             ======== ==========  =======   =========  ===========  ========  ============  ===========  ===========
                             ----------------------------------------  -------------------------------------------------------------

</TABLE>
                            See accompanying notes.
                                      F-5
<PAGE>
JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION

The accompanying  unaudited financial  statements are of Jacobs Financial Group,
Inc. (the "Company" or "JFG").  References  herein to the Company  include NELX,
Inc.,  of which JFG is  successor  by  reincorporation  merger  and name  change
effected on or about December 29, 2005. These financial statements were prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial information and Article 10 of Regulation S-X. Accordingly, they do not
include all of the  information  and  footnotes  required by generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  all adjustments considered necessary for a fair presentation of the
results of operations  and financial  condition for the periods  presented  have
been included. Such adjustments are of a normal recurring nature. The results of
operations for the three and six-month  periods ended November 30, 2006, are not
necessarily indicative of the results of operations that can be expected for the
fiscal year ending May 31, 2007. For further information, refer to the Company's
audited  financial  statements and footnotes thereto included in Item 7. of Form
10-KSB filed on September 14, 2006.

LIQUIDITY AND GOING CONCERN

These  financial  statements  are  presented  on the basis that the Company is a
going  concern.  Going concern  contemplates  the  realization of assets and the
satisfaction  of  liabilities in the normal course of business over a reasonable
length  of  time.  The  Company  incurred   operating  losses  of  approximately
$1,874,000  and  $1,120,000  for the years  ended May 31,  2006 and 2005 and has
incurred losses of  approximately  $699,000 and $1,323,000  respectively for the
three and  six-month  periods  ended  November 30, 2006.  Losses are expected to
continue  until  the  Company's  insurance  company  subsidiary,   First  Surety
Corporation  ("FSC")  develops  substantial   business.   While  improvement  is
anticipated  as the business  plan is  implemented,  restrictions  on the use of
FSC's  assets  (See  Management's   Discussion  and  Analysis),   the  Company's
significant  deficiency  in  working  capital  and  stockholders'  equity  raise
substantial doubt about the Company's ability to continue as a going concern.

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


NOTE B - RECENT ACCOUNTING PRONOUNCEMENTS

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

                                      F-6
<PAGE>


JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE B - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

SFAS No. 157 defines fair value,  establishes  a framework  for  measuring  fair
value in generally accepted accounting principles, and expands disclosures about
fair value  measurements.  The  Statement  does not  require  any new fair value
measurements, however, for some entities, the application of this Statement will
change  current  practice.  Management  does  not  expect  the  adoption  of the
provisions of SFAS No. 157 to have a material impact on the Company's results of
operations or financial position.

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

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

NOTE C - DUE FROM/TO RELATED PARTY

During 2005 and 2006, the Company's  operating expenses were partially funded by
advances  from its largest  shareholder  and chief  executive  officer,  John M.
Jacobs.  The  funding  source for these  advances  originated  with  obligations
incurred by Mr. Jacobs with third-parties  (such obligations,  together with the
loans by Mr. Jacobs to the Company,  "back-to-back  loans") with interest  rates
ranging from 6.75% to 12%. To assure that  repayments of the various  borrowings
by the  Company  that  were  either  guaranteed  by Mr.  Jacobs or loaned to the
Company by Mr. Jacobs via such  back-to-back loan arrangements did not result in
a deemed loan to Mr.  Jacobs,  Mr. Jacobs  entered into an Assumption  Agreement
with the Company,  pursuant to which Mr. Jacobs assumes,  and agrees to hold the
Company harmless from, principal of specified indebtedness of the Company as and
when  necessary  to fully  offset what might  otherwise  be deemed an advance of
funds arising out of the Company's financing activities.

During  the  year  ended  May 31,  2006,  the  Company  made net  repayments  of
$1,170,546 on the  back-to-back  loans which was $508,036 more than the original
loans and interest  charges.  In accordance with the Assumption  Agreement,  the
Company assigned to Mr. Jacobs and Mr. Jacobs assumed responsibility for payment
of certain debt totaling  $101,326 and accounts payable totaling $365,000 during
the year ended May 31, 2006.  The debt  obligation  was re-issued in the name of
Mr.  Jacobs;  and therefore the debt amount was relieved and offset  against the
receivable  from Mr.  Jacobs.  Although the Company  assigned  accounts  payable
totaling $365,000 to Mr. Jacobs through the Assumption Agreement,  for financial
reporting purposes

                                      F-7
<PAGE>

JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE C - DUE FROM/TO RELATED PARTY (CONTINUED)

under generally  accepted  accounting  principles,  the accounts  payable amount
could not be  derecognized  until  either paid or released by the  creditor  and
accordingly,  the amount due from Mr. Jacobs as of May 31, 2006 was $361,010. On
September  13,  2006,  the  Company  obtained a release  from the obligee of the
$365,000  account  payable  that was assumed by John M.  Jacobs  pursuant to the
Assumption Agreement,  with the effect that, in accordance with the terms of the
Assumption  Agreement,  Mr. Jacobs assumption of such account payable was offset
against and eliminated the account receivable of the Company from Mr. Jacobs.

Subsequent  to May 31,  2006,  advances to the Company  from Mr.  Jacobs for the
three and  six-month  periods  ended  November 30, 2006  amounted to $78,550 and
$205,776 respectively,  with repayments from the Company to Mr. Jacobs amounting
to $60,052 and $136,225 respectively,  resulting in a balance owed to Mr. Jacobs
as of November 30, 2006 of $73,541.

NOTE D - NOTES PAYABLE

At November 30, 2006,  the Company had unsecured  notes  payable to  individuals
(primarily common shareholders)  amounting to $146,629. Such notes have maturity
dates of less than one year or are  payable on demand and bear  interest  at the
rate of ten percent (10.00%) per annum.

On June 28, 2006, the Company  borrowed  $250,000 under an unsecured  short-term
line of credit facility with a commercial bank to provide  additional  operating
capital.  The credit facility  requires monthly interest  payments at a variable
interest rate based on the Wall Street Journal Prime rate plus five percent. The
loan matures on December 28, 2006.

NOTE E - OTHER LIABILITIES

The Company had been delinquent in paying certain of its payroll tax obligations
for  periods  ending on or  before  December  31,  2005.  The  total  liability,
including an estimate for penalties and interest, is approximately  $466,650 and
is included  in the  Company's  financial  statements  under Other  Liabilities.
Management continues to seek financing  arrangements that will allow it to fully
satisfy this obligation in the near future.

NOTE F - MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCK

In the  three-month  period  ended  November  30,  2006,  the Company  issued an
additional  250 shares of Series B  Preferred  Stock and  250,000  shares of the
Company's common stock as additional consideration,  in exchange for cash in the
amount of $250,000.  As of November 30, the Company has 654.401 shares of Series
B Preferred stock authorized and available for issue.

In the  three-month  period  ended  November  30,  2006,  previously  issued and
outstanding stock warrants totaling 1,500,000 were exercised. As of November 30,
2006,  the Company had issued and  outstanding  warrants to purchase  15,404,664
shares of common stock.

                                      F-8
<PAGE>

JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE G - SUBSEQUENT EVENTS

Subsequent to November 30, 2006,  the Company issued an additional 210 shares of
Series B Preferred  Stock and 210,000  shares of the  Company's  common stock as
additional consideration, in exchange for cash in the amount of $210,000.

On December 14,  2006,  the Company  borrowed  $25,000 on a demand basis from an
unrelated  individual.  Such  note  bears  interest  at the rate of ten  percent
(10.00%),  is unsecured and is guaranteed by the Company's  largest  shareholder
and chief executive officer, John M. Jacobs.

On December 21, 2006, the Company repaid an obligation owed to a creditor in the
amount of $87,221  relating to professional  fees incurred in the Company's 2002
fiscal year in  connection  with  litigation  resulting  from a failed  business
combination  transaction.  As of  November  30,  2006,  the  Company had accrued
interest expense on the obligation that amounted to approximately $42,450. Under
the terms of an  agreement  reached in October  2006,  in  consideration  of the
repayment  of the  principal  obligation  by a  certain  agreed-upon  date,  the
creditor  waived  the  payment  of any  accrued  interest  on  such  obligation.
Accordingly,  upon  the  satisfaction  of  the  debt  in  accordance  with  such
agreement, the accrual for interest was reversed.

On December  28,  2006,  the  compensation  committee  of the board of directors
awarded  2,100,000 of incentive  stock  options to acquire  common  shares at an
exercise  price of four cents ($.04) per share,  of which 450,000  shares vested
immediately  and the  remaining  1,650,000  options  vesting over the next three
years.  Stock-based compensation expense attributable to such awards amounted to
approximately  $21,000, of which approximately  $4,500 is attributable to shares
that vested immediately and unrecognized  compensation  expense of approximately
$16,500 related to non-vested awards being recognized over the next three years.

On  December  31,  2006,  the Company  elected to  continue to defer  payment of
dividends on its Series A Preferred stock and Series B Preferred stock with such
accrued and unpaid dividends amounting to $13,738 and $197,532, respectively. As
of December 31, 2006, the accumulated  accrued and unpaid dividend on the Series
A Preferred stock and Series B Preferred stock amounted to $41,746 and $750,448,
respectively.


NOTE H - SEGMENT REPORTING

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

                                      F-9
<PAGE>


JACOBS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE H - SEGMENT REPORTING (CONTINUED)
<TABLE>
<CAPTION>

                                                                         THREE-MONTH PERIOD ENDED
                      INDUSTRY SEGMENT                           NOVEMBER 30, 2006       NOVEMBER 30, 2005
                      ----------------                           -----------------       -----------------
REVENUES:
<S>                                                              <C>                     <C>
 Investment advisory                                             $          66,128       $        53,945
 Surety insurance                                                          132,321                   (73)
 Corporate                                                                       -                     -
                                                                 -----------------       -----------------
 Total revenues                                                  $         198,449       $        53,872
                                                                 =================       =================

OPERATING (LOSS):
 Investment advisory                                             $         (96,649)      $      (155,656)
 Surety insurance                                                          (34,079)              (53,577)
 Corporate                                                                (232,463)             (206,622)
                                                                 -----------------       -----------------
 Total operating income (loss)                                   $        (363,191)      $      (415,855)
                                                                 =================       =================



                                                                          SIX-MONTH PERIOD ENDED
                      INDUSTRY SEGMENT                           NOVEMBER 30, 2006       NOVEMBER 30, 2005
                      ----------------                           -----------------       -----------------
REVENUES:
 Investment advisory                                             $         139,536       $       104,062
 Surety insurance                                                          282,786                 9,437
 Corporate                                                                  11,092                     -
                                                                 -----------------       -----------------
 Total revenues                                                  $         433,414       $       113,499
                                                                 =================       =================

OPERATING (LOSS):
 Investment advisory                                             $        (230,054)      $      (272,769)
 Surety insurance                                                          (35,901)             (103,922)
 Corporate                                                                (402,123)             (336,438)
                                                                 -----------------       -----------------
 Total operating income (loss)                                   $        (668,078)      $      (713,129)
                                                                 =================       =================
</TABLE>

                                      F-10



<PAGE>

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

RECENT DEVELOPMENTS AND FUTURE DIRECTION OF COMPANY

Since the  Registrant's  (Company or JFG)  acquisition of its insurance  company
subsidiary,  First Surety  Corporation  (FSC), in December 2005,  management has
focused its primary  efforts on the initial  development  and  marketing  of the
business in West Virginia and laying  groundwork for the future expansion of the
business into other states.  Of primary  importance to the Company's  ability to
fully implement its business plan and expand into other states is the ability to
raise  additional  capital to increase the capacity of the insurance  subsidiary
and to fund  continuing  operations  as the  business is being fully  developed.
Management is  investigating  various avenues of financing,  including  possible
public and private offerings of securities,  and business combinations that will
enhance the business of the Company.


RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED NOVEMBER 30, 2006

The  Company  experienced  a loss (after  accretion  of  mandatorily  redeemable
convertible  preferred stock) for the three-month period ended November 30, 2006
in the  amount  of  $699,366  as  compared  with  a loss  of  $415,855  for  the
corresponding period ended November 30, 2005.

REVENUES

Revenues for the  three-month  period ended  November 30, 2006 were  $198,449 as
compared with $53,872 for the corresponding  period ended November 30, 2005. The
overall  increase in revenues is  attributable to the acquisition of FSC and the
surety business it has secured since January 1, 2006.

Quarterly revenues from the Company's investment management segment,  consisting
of its subsidiary,  Jacobs & Company (J&C), net of advisory  referral fees, were
$59,803 for the  three-month  period ended  November  30, 2006 as compared  with
$53,945 for the  corresponding  period ended  November 30, 2005.  As  investment
advisory  fees are based on the market  value of assets under  management,  some
fluctuation  will occur due to  overall  market  conditions.  For the most part,
however,  such revenues will remain relatively  constant from quarter to quarter
with any large  fluctuations  being attributable to the growth or loss of assets
under management.  The growth reflected in the corresponding  periods is largely
attributable to investment  collateral  accounts  required as a condition to the
issuance of surety bonds under FSC's bonding programs.

Quarterly  revenues from the Company's surety insurance  segment,  consisting of
FSC and the Company's  subsidiary  Triangle  Surety  Agency,  Inc.  (TSA),  were
$132,321 for the  three-month  period ended  November 30, 2006 as compared  with
$(73)  for  the  corresponding  period  ended  November  30,  2005.  $81,138  is
attributable  to premiums  earned,  $44,058 is  attributable  to net  investment
income,  and  $7,125 is  attributable  to  commissions  earned  on surety  bonds
written.  Revenue  for this  segment  of the  business  is  expected  to be more
"seasonable" from  quarter-to-quarter  as commission revenue is dependent on the

                                       3
<PAGE>

timing of issuance or renewal of bonds  placed by the Company,  whereas  premium
revenue is  recognized  ratably over the term of the policy  period.  Investment
income is expected to remain relatively  consistent,  but can fluctuate based on
interest rates and market conditions.  The increase in the corresponding periods
reflects  growth in assets held for  investment  attributable  to the  Company's
acquisition of FSC. Due to the nature of surety bonds,  fluctuations  in premium
revenue for  comparable  periods  largely  reflect the overall growth or loss of
business.

Other income  reflects  interest  earned on amounts due from a related party and
income from other advisory services provided.


EXPENSES

Incurred policy losses in the amount of $35,495 for the three-month period ended
November 30, 2006 represent the provision for loss and loss  adjustment  expense
for  "incurred  but not reported"  (IBNR)  losses  attributable  to surety bonds
issued by FSC since its  acquisition in December 2005.  Such estimates have been
based on industry  averages  adjusted  for factors  that are unique to the FSC's
underwriting  approach.  The Company has  experienced no claims for losses as of
November 30, 2006.

Insurance policy  acquisition costs in the amount of $28,042 for the three-month
period ended November 30, 2006 represent  charges to operations for underwriting
expense and premium tax  attributable  to surety  polices  issued by FSC and are
recognized ratably over the period in which premiums are earned.

General and  administrative  expenses for the three-month  period ended November
30, 2006 were $419,194 as compared with $305,192 for the comparable period ended
November 30, 2005,  representing  an increase of $114,002.  Salaries and related
expense  increased   approximately   $84,000  relating   primarily  to  staffing
additions,  related increased benefit  expenses,  and stock option  compensation
expense,   which   approximated   $58,000.   General  office  expense  increased
approximately  $4,500 related primarily to the lease of additional office space.
Other general and administrative expense increased  approximately $25,000 and is
attributable  to the  combination  of  the  operation  of  FSC,  use of  outside
consultants  in pursuit of  additional  capital and  expansion of the  Company's
business into other states, and increased travel-related expenditures.

J&C is the investment  advisor to the Jacobs & Company Mutual Fund (the "Fund").
While  the Fund is  responsible  for its own  operating  expenses,  J&C,  as the
advisor,  has agreed to limit the Fund's aggregate annual operating  expenses to
2.00% of the average net assets.  Under this expense limitation  agreement,  J&C
absorbed  approximately  $48,650 of the  Fund's  operating  expenses  during the
three-month   period  ended  November  30,  2006  as  compared  to  $43,200  for
corresponding  period from the previous year. This increase can be attributed to
a decline in the average size of the Fund over the  respective  periods.  As the
Fund grows in size (of assets under  management),  expenses (in excess of the 2%
level)  absorbed by J&C will decrease until the Fund reaches  sufficient size to
support its on-going  operating  costs. In contrast,  as the Fund grows in size,
revenues from investment advisory fees will increase.  Additionally,  should the
Fund's operating expense ratio fall below the 2.00% level, the costs absorbed by

                                       4
<PAGE>

J&C are now  reimbursable  to it for a  period  of up to  three  years.  For the
three-month period ended November 30, 2006, the Fund's investment  advisory fees
decreased to $11,472 as compared with $16,038 for the corresponding  three-month
period ended November 30, 2005 as a result of a decrease in the Fund size.

Interest expense for the three-month  period ended November 30, 2006 was $27,418
as compared with $112,687 for the corresponding  period ended November 30, 2005.
Included in interest expense for the three-month  period ended November 30, 2006
is an additional accrual of approximately $9,225 relating to additional interest
owed on the Company's payroll tax liability, based on recent notices provided by
the Internal Revenue Service. Such amount has been included in other liabilities
in the Consolidated Condensed Balance Sheet. Excluding this amount, the decrease
in  interest  expense is largely  attributable  to the  conversion  of  previous
indebtedness  of the Company  incurred to fund  ongoing  operations  to Series B
preferred stock.

ACCRETION AND DIVIDENDS

Accretion of mandatorily redeemable convertible preferred stock in the amount of
$336,175 is  comprised  of  accretion  of  discount  in the amount of  $121,800,
accrued but unpaid  dividends on preferred stock in the amount of $203,658,  and
$10,717 by which the  redemption  price  exceeded the carrying value of redeemed
shares of Series B preferred stock.

RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED NOVEMBER 30, 2006

The  Company  experienced  a loss (after  accretion  of  mandatorily  redeemable
convertible preferred stock) for the six-month period ended November 30, 2006 in
the  amount  of  $1,322,560  as  compared  with  a  loss  of  $713,129  for  the
corresponding period ended November 30, 2005.

REVENUES

Revenues  for the  six-month  period ended  November  30, 2006 were  $433,414 as
compared with $113,499 for the corresponding period ended November 30, 2005. The
overall  increase in revenues is  attributable to the acquisition of FSC and the
surety business it has secured since January 1, 2006.

Revenues from the Company's investment management segment (J&C), net of advisory
referral fees, were $133,211 for the six-month period ended November 30, 2006 as
compared with $104,062 for the corresponding  period ended November 30, 2005. As
investment  advisory  fees  are  based  on the  market  value  of  assets  under
management,  some fluctuation will occur due to overall market  conditions.  For
the most part,  however,  such revenues will remain relatively constant with any
large  fluctuations  being  attributable  to the growth or loss of assets  under
management.  The  growth  reflected  in the  corresponding  periods  is  largely
attributable to investment  collateral  accounts  required as a condition to the
issuance of surety bonds under FSC's bonding programs.

Revenues from the Company's surety insurance segment, consisting of FSC and TSA,
were $282,786 for the six-month  period ended November 30, 2006 as compared with
$9,437 for the  corresponding  period  ended  November  30,  2005.  $156,958  is

                                       5
<PAGE>

attributable  to premiums  earned,  $89,737 is  attributable  to net  investment
income,  and  $36,091 is  attributable  to  commissions  earned on surety  bonds
written.  Revenue  for this  segment  of the  business  is  expected  to be more
"seasonable"  as  commission  revenue is  dependent on the timing of issuance or
renewal of bonds placed by the Company,  whereas  premium  revenue is recognized
ratably  over the term of the policy  period.  Investment  income is expected to
remain  relatively  consistent,  but can fluctuate  based on interest  rates and
market  conditions.  The increase in the  corresponding  periods reflects growth
attributable  to the Company's  acquisition  of FSC. Due to the nature of surety
bonds,  fluctuations  in revenue  for  comparable  periods  largely  reflect the
overall growth or loss of business.

Other income  reflects  interest  earned on amounts due from a related party and
income from other advisory services provided.


EXPENSES

Incurred  policy losses in the amount of $51,797 for the six-month  period ended
November 30, 2006 represent the provision for loss and loss  adjustment  expense
for  "incurred  but not reported"  (IBNR)  losses  attributable  to surety bonds
issued by FSC since its  acquisition in December 2005.  Such estimates have been
based on industry  averages  adjusted  for factors  that are unique to the FSC's
underwriting  approach.  The Company has  experienced no claims for losses as of
November 30, 2006.

Insurance  policy  acquisition  costs in the amount of $54,246 for the six-month
period ended November 30, 2006 represent  charges to operations for underwriting
expense and premium tax  attributable  to surety  polices  issued by FSC and are
recognized ratably over the period in which premiums are earned.

General and administrative  expenses for the six-month period ended November 30,
2006 were  $782,387 as compared with  $539,548 for the  comparable  period ended
November 30, 2005,  representing  an increase of $242,839.  Salaries and related
expense  increased   approximately   $180,000  relating  primarily  to  staffing
additions,  related increased benefit  expenses,  and stock option  compensation
expense,   which  approximated   $115,750.   General  office  expense  increased
approximately $10,500 related primarily to the lease of additional office space.
Other general and administrative expense increased  approximately $52,500 and is
attributable  to the  combination  of  the  operation  of  FSC,  use of  outside
consultants  in pursuit of  additional  capital and  expansion of the  Company's
business into other states, and increased travel-related expenditures.

J&C is the investment  advisor to the Jacobs & Company Mutual Fund (the "Fund").
While  the Fund is  responsible  for its own  operating  expenses,  J&C,  as the
advisor,  has agreed to limit the Fund's aggregate annual operating  expenses to
2.00% of the average net assets.  Under this expense limitation  agreement,  J&C
absorbed  approximately  $94,600 of the  Fund's  operating  expenses  during the
six-month   period   ended   November  30,  2006  as  compared  to  $79,600  for
corresponding  period from the previous year. This increase can be attributed to
a decline  in the  average  size of the Fund  over the  respective  periods  and
adjustments  made by the fund  administrator  for  underaccruals  of  expense in

                                       6
<PAGE>

comparison to budgeted amounts through the end of the Fund's fiscal year. As the
Fund grows in size (of assets under  management),  expenses (in excess of the 2%
level)  absorbed by J&C will decrease until the Fund reaches  sufficient size to
support its on-going  operating  costs. In contrast,  as the Fund grows in size,
revenues from investment advisory fees will increase.  Additionally,  should the
Fund's operating expense ratio fall below the 2.00% level, the costs absorbed by
J&C are now  reimbursable  to it for a  period  of up to  three  years.  For the
six-month  period ended November 30, 2006, the Fund's  investment  advisory fees
decreased to $23,652 as compared  with $26,789 for the  corresponding  six-month
period ended November 30, 2005 as a result of a decrease in the Fund size.

Interest  expense for the six-month  period ended November 30, 2006 was $112,687
as compared with $204,497 for the corresponding  period ended November 30, 2005.
Included in interest expense for the six-month period ended November 30, 2006 is
an additional accrual of approximately  $79,150 relating to additional  interest
owed on the Company's payroll tax liability, based on recent notices provided by
the Internal Revenue Service. Such amount has been included in other liabilities
in the Consolidated Condensed Balance Sheet. Excluding this amount, the decrease
in  interest  expense is largely  attributable  to the  conversion  of  previous
indebtedness  of the Company  incurred to fund  ongoing  operations  to Series B
preferred stock.

ACCRETION AND DIVIDENDS

Accretion of mandatorily redeemable convertible preferred stock in the amount of
$654,482 is  comprised  of  accretion  of  discount  in the amount of  $243,886,
accrued but unpaid  dividends on preferred stock in the amount of $399,879,  and
$10,717 by which the  redemption  price  exceeded the carrying value of redeemed
shares of Series B preferred stock.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

INTANGIBLE ASSETS

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

RESERVE FOR LOSSES AND LOSS EXPENSES

Reserves  for  unpaid  losses  and loss  adjustment  expenses  of the  insurance
subsidiary are estimated using individual  case-basis  valuations in conjunction
with estimates derived from industry and company experience. FSC has experienced
no claims for losses as of November 30, 2006.

                                       7
<PAGE>

FSC is currently  licensed to write coal  reclamation and mining surety bonds in
West Virginia. By nature,  reclamation of land that has been disturbed by mining
operations  is  a  highly  regulated   process  by  federal,   state  and  local
jurisdictions  and such bonds are  generally  long-term  in nature  with  mining
operations  and  reclamation  work being  conducted in unison as the property is
being mined.  Additionally,  no two  principals  and properties are alike due to
varied company structures and unique geography and geology of each site.

In underwriting  such bonds,  management  obtains  estimates of costs to reclaim
such  properties,  in accordance with the  specifications  of the mining permit,
prepared by independent outside professionals experienced in this field of work.
Such  estimates  are then  periodically  updated and  compared  with  marketable
securities pledged, and held for the benefit of FSC as collateral for the surety
bond, to mitigate the exposure to significant loss. Should the principal default
in its obligation to reclaim the property as specified in the mining permit, FSC
would then use the funds held in the collateral  account to reclaim the property
or forfeit the face amount of the surety bond.  Losses can occur if the costs of
reclamation  exceed the estimates obtained at the time the bond was underwritten
or upon subsequent re-evaluations,  if sufficient collateral is not obtained, or
if the collateral held has experienced significant deterioration in value.

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

ANALYSIS OF LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

Pursuant to the approval of the  transaction to acquire FSC by the West Virginia
Department  of  Insurance,  the Company is restricted in its ability to withdraw
monies  from FSC  without  the prior  approval  of the  Insurance  Commissioner.
Accordingly,  of total  investments  and cash in the amount of  $3,864,766 as of
November 30, 2006,  the use of $3,832,257  is  restricted  to FSC.  Furthermore,
additional  capital raised  pursuant to the sale of Series A preferred  stock of
the Company in connection with the issuance of  partially-collateralized  surety
bonds must generally be contributed by the Company into the surplus  accounts of
FSC.  Accordingly,  because of these  restrictions,  as of November  30, 2006, a
deficiency in working capital exists as the Company's current liabilities exceed
its available current assets by approximately $1,775,000.  The Company's ability
to pay  dividends  accrued  with  respect to its Series A and Series B preferred
stock will be limited until such time as current  liabilities are  substantially
liquidated  and  sufficient  cash flow from  operations  is being  generated  to
service such obligations.

For the  six-month  period ended  November 30, 2006,  the Company  experienced a
deficiency  in  cash  flow  from  operations  of  approximately  $500,000.  Such
deficiency  was funded through  short-term  borrowings and the sale of shares of
the Company's Series B Preferred stock.  While management expects revenue growth
and  cash  flow  to  increase  significantly  as  its  business  plan  is  fully
implemented,  it anticipates that losses and working capital  deficiencies  will

                                       8
<PAGE>

continue until FSC is able to develop a substantial book of business. Management
continues to seek  additional  capital to increase the capacity of its insurance
subsidiary  and to fund  continuing  operations  as the  business is being fully
developed. As a result of being able to share resources (primarily personnel) to
minimize  operating  costs,  management  expects FSC to be at break-even or cash
flow  positive in fiscal  2007,  although  the use of its assets and profits are
expected  to  remain  restricted  to its  stand-alone  operation  by  regulatory
authority.  And while growth of the FSC business  will provide  additional  cash
flow to the Company's other  subsidiaries,  J&C and TSA, it is anticipated  that
working capital  deficiencies  will need to be met either through the raising of
additional  capital  or  borrowings.  However,  there can be no  assurance  that
additional  capital (or debt financing) will be available when and to the extent
required or, if  available,  on terms  acceptable  to the Company.  Accordingly,
concerns  as to the  Company's  ability  to  continue  as a  going  concern  are
substantial.  The consolidated condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



















                                       9

<PAGE>


ITEM 3.            CONTROLS AND PROCEDURES

EVALUATION OF INTERNAL AND DISCLOSURE CONTROLS

As required by Rule 13a-15 under the Securities  Exchange Act of 1934, as of the
end of the period covered by the quarterly  report,  being November 30, 2006, we
have carried out an evaluation of the  effectiveness of the design and operation
of the Company's disclosure controls and procedures. This evaluation was carried
out  under  the  supervision  and  with  the   participation  of  the  Company's
management,  including  Company's  president and chief financial officer.  Based
upon that evaluation,  the Company's  president and chief financial officer have
concluded that the Company's disclosure controls and procedures are effective as
of the end of the period  covered by this report.  There have been no changes in
our internal  controls over financial  reporting  that occurred  during the most
recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect our internal controls over financial reporting.


                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

Between  December 29, 2005 and August 31, 2006, the Company issued 945 shares of
Series A  Preferred  Stock  pursuant to ongoing  bonding  programs of FSC for an
aggregate consideration of $945,000.

In October 2006, 52 shares of Series A Preferred  Stock were issued  pursuant to
ongoing bonding programs of FSC in exchange for cash in the amount of $52,000.

In October 2006,  125 shares of Series B Preferred  Stock and 125,000  shares of
common stock were issued to individuals  (less than 5% shareholders) in exchange
for cash in the amount of $125,000.

In November 2006,  125 shares of Series B Preferred  Stock and 125,000 shares of
common  stock were issued to  individuals  in exchange for cash in the amount of
$125,000.

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

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

                                       10
<PAGE>

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.
















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<PAGE>


ITEM 6. EXHIBITS

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

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



SIGNATURES


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

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

Dated: January 12, 2007             By:    /s/ John M. Jacobs
                                    ----------------------------------------
                                               John M. Jacobs
                                               President


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