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

                                   FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
    1934
                     For the quarterly period ended June 30, 2005

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934
                      For the transition period from           to
                                                     ----------   -----------
Commission file number   000-49679

                                 LITFUNDING CORP
                                 ---------------
                 (Name of small business issuer in its charter)

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


                 3700 Pecos McLeod #100, Las Vegas, Nevada 89121
                    (Address of principal executive offices)

                                 (702) 317 1610
                                 --------------
                           (Issuer's telephone number)

     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( )


          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS.

     Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes(X) No ( )

APPLICABLE ONLY TO CORPORATE ISUERS

          State the number of shares outstanding of each of the issuer's class
of common equity: 14,895,451 shares of common stock, $.001 par value per share
were outstanding as of August 11, 2005. There were no shares of the issuer's
preferred stock issued and outstanding.

Transitional Small Business Disclosure format (check one):   Yes ( )  No (X)



                                       1
<PAGE>


PART I

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET AT June 30, 2005 (UNAUDITED)
---------------------------------------------------------

ASSETS

   Cash and cash equivalents                                     $      28,076
   Accounts receivable                                                  72,250
   Contingent advances less reserve for unsuccessful
        resolutions of lawsuits of $69,000                             621,000
   Property and equipment, net of accumulated
        depreciation of $79,383                                         52,991
   Other assets                                                         31,881
                                                                 --------------
TOTAL ASSETS                                                     $     806,198
                                                                 ==============


LIABILITIES AND STOCKHOLDERS' DEFICIT:

Liabilities not subject to compromise -
  Accounts payable                                               $     613,158
  Accrued liabilities                                                  280,385
  Note payable (net of debt discount $34,000)                          688,500
  Participation obligations                                            725,000
  Interest payable                                                       9,468
                                                                 --------------
      Total liabilities not subject to compromise                    2,316,511
                                                                 --------------

Liabilities subject to compromise-
 Trade and other miscellaneous claims                                  515,692
 Debentures                                                            200,000

                                                                 --------------
      Total liabilities subject to compromise                          715,692
                                                                 --------------

          Total liabilities                                          3,032,203
                                                                 --------------

STOCKHOLDER'S DEFICIT:
Preferred Stock, par value $0.001, 10,000,000 shares
     authorized, none issued and outstanding                                 -
   Common stock,$0.001 par value, 50,000,000 shares
     authorized, 14,895,451 issued and outstanding                      14,895
   Additional paid-in capital                                        6,535,333
   Common stock subscribed                                            (748,000)

   Accumulated deficit                                              (8,028,233)
                                                                 --------------
      Total stockholders' deficit                                   (2,226,005)
                                                                 --------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                      $     806,198
                                                                 ==============





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

                                       2
<PAGE>



LITFUNDING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 2005 AND 2004 (UNAUDITED)
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                  THREE MONTHS                      SIX MONTHS
                                                                  ENDED JUNE 30                    ENDED JUNE 30
                                                         -----------------------------    -----------------------------
                                                              2005            2004             2005           2004
                                                         -------------   -------------    -------------   -------------
<S>                                                            <C>             <C>              <C>            <C>
NET  REVENUE                                             $    137,500    $  1,284,489     $    147,875    $  1,815,679

OPERATING EXPENSES:
     Selling                                                   33,601               -           50,308              -
     Reserve for unsuccessful resolution of lawsuits           (4,500)        243,082           27,250         646,083
     General and administrative expenses                      743,786       1,025,090        1,530,539       1,996,868
                                                         -------------   -------------    -------------   -------------
         Total expenses                                       772,887       1,268,172        1,608,097       2,642,951
                                                         -------------   -------------    -------------   -------------

LOSS FROM OPERATIONS                                         (635,387)         16,317       (1,460,222)       (827,272)
                                                         -------------   -------------    -------------   -------------

OTHER INCOME AND (EXPENSES)
     Interest (expense), net of interest income              (134,136)      (1,094,019)        (221,202)     (2,033,357)
     Other                                                   (187,688)         74,258          (121,533)         80,867
                                                         -------------   -------------    -------------   -------------

     Total other income (expense)                            (321,814)     (1,019,761)        (342,735)     (1,952,490)
                                                         -------------   -------------    -------------   -------------


(LOSS) BEFORE REORGANIZATION ITEMS,                          (957,201)     (1,003,444)      (1,802,957)     (2,779,762)

REORGANIZATION ITEMS:
    Legal fees                                                      -               -                -         140,000
                                                         -------------   -------------    -------------   -------------


(LOSS) INCOME BEFORE INCOME TAXES                            (957,201)     (1,003,444)      (1,802,957)     (2,919,762)
                                                         -------------   -------------    -------------   -------------

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

NET INCOME (LOSS)                                        $   (957,201)   $ (1,003,444)    $ (1,802,957)   $ (2,919,762)
                                                         =============   =============    =============   =============


BASIC EARNINGS (LOSS) PER SHARE:                         $      (0.07)          (0.11)    $      (0.13)   $      (0.31)
                                                         =============   =============    =============   =============


DILUTED EARNINGS (LOSS) PER SHARE:                       $      (0.07)          (0.11)    $      (0.13)   $      (0.31)
                                                         =============   =============    =============   =============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

  Basic                                                    14,411,082       9,410,850       13,400,327       9,410,850
                                                         =============   =============    =============   =============

  Diluted                                                  14,411,082       9,410,850       13,400,327       9,410,850
                                                         =============   =============    =============   =============
</TABLE>






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

                                       3
<PAGE>







CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
PERIODS ENDED JUNE 30, 2005 AND 2004
-----------------------------------------------

<TABLE>
<CAPTION>
<S>                                                                          <C>               <C>
                                                                            2005               2004
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                   $   (1,802,957)   $    (2,919,763)
  Depreciation and amortization                                               14,878             15,662
  Reserve for unsuccessful resolution of lawsuits                             15,000            642,496
  Value of warrants and common stock issued for services                     497,979
  Changes in assets and liabilities:
    Trade and other accounts receivable                                       40,250         (1,891,262)
    Other assets                                                             (13,353)            (2,841)
    Contingent advances                                                     (275,250)         1,463,301
    Debt discount                                                            185,890                  -
   Accounts payable and accrued expenses                                     288,816            709,358
   Trade and other claims subject to compromise                              (88,110)                -
   Interest payable                                                           32,139          2,022,354
   Gain on discount of pre-petition debt                                          -             (74,258)
                                                                      ---------------  -----------------
          Net cash (used in) operating activities                         (1,078,012)           (34,953)
                                                                      ---------------  -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:


  Purchases of property and equipment                                         (3,734)                 -
                                                                      ---------------  -----------------
          Net cash (used in) investing activities                             (3,734)                 -
                                                                      ---------------  -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Sale of common stock and exercised warrants                                293,300                  -
  Proceeds from notes payable                                                222,500                  -
  Proceeds from investor obligations                                         252,500                  -
  Principal repayments on capital lease obligations                                -             (4,514)
                                                                      ---------------  -----------------
          Net cash provided by financing activities                          768,300             (4,514)
                                                                      ---------------  -----------------

INCREASE (DECREASE) IN CASH                                                 (313,446)           (39,467)

CASH, BEGINNING OF PERIOD                                                    341,522             51,676
                                                                      ---------------  -----------------

CASH, END OF PERIOD                                                   $       28,076    $        12,209
                                                                      ===============  =================


         Interest paid                                                $       4,250    $         8,975
                                                                      ===============  =================

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
       Imputed value of warrants issued for extension of debt         $      171,288    $            -
                                                                      ===============  =================
      Note payable issued for relief of debt & interest payable       $            -    $    26,275,709
                                                                      ===============  =================
      Accrued interest added to bankruptcy liabilities                $            -    $     1,582,930
                                                                      ===============  =================
     Exercise of options in exchange for accrued salary                       45,000    $            -
                                                                      ===============  =================
     Common stock issued for relief of liabilities                    $      172,130    $            -
                                                                      ==============   =================
</TABLE>







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

                                       4
<PAGE>





LITFUNDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED
JUNE 30, 2005 AND 2004
----------------------------------------------------------------


1. ORGANIZATION AND BASIS OF PRESENTATION
   --------------------------------------

LitFunding Corp. ("The Company") was incorporated in the state of Nevada. The
Company serves as a holding company for its wholly owned subsidiaries,
California LitFunding and LitFunding USA ("The Companies"), both incorporated in
the State of Nevada. California LitFunding was the entity that conducted
substantially all operations during 2004, and owned substantially all of the
operating assets, employed all the personnel, and paid the obligations of all
the corporations. LitFunding USA began assuming some operations in the last
quarter of 2004 and in 2005 assumed responsibility for substantially all the
operations of all the corporations.

California LitFunding is the successor-in-interest by merger to the "original"
company in the three primary entity corporate structure that now exists. It has
been in the business of investing in litigation recoveries since 2000. In
summary, California LitFunding raised capital and advanced this capital to
various law firms pursuant to "Settlement Agreements". LitFunding USA resumed
the business of litigation funding subsequent to June 17th, 2004, after the
United States Bankruptcy Court entered an order confirming the LitFunding Corp.
and California LitFunding joint plans of reorganization. LitFunding USA pursues
this business by itself and through several wholly owned limited liability
companies ("LLC's"). Settlement Agreements provide that the funds advanced shall
be repaid to the Companies, plus a fee, when the lawsuits referenced in the
agreement ultimately settle. The exact amount of the fee payable on the funds
advanced depends upon the length of time the funds are outstanding, up to a
fixed limit. Pursuant to the terms of the Settlement Agreements, the Companies'
contractual right to payment is limited to the funds ultimately paid to the law
firm from the specified lawsuit, or lawsuits, in which the funds are invested or
expended.

On January 23, 2003, the Company completed a merger with RP Entertainment, Inc.,
a publicly held Nevada corporation, through a newly formed entity, RP
Acquisition Corp., a Nevada corporation, as a wholly owned subsidiary of RP
Entertainment. On February 25, 2003, the Company entered into an Agreement of
Merger with California LitFunding, formerly LitFunding Corp. (LFC) a California
corporation. LFC became a subsidiary when the Articles of Merger between RP
Acquisition Corp., the Registrant's wholly owned subsidiary that was formed to
facilitate the merger, and LFC were filed with the Nevada Secretary of State.
The charter documents of the Company are the charter documents of the surviving
corporation. Pursuant to the Merger Agreement, 7,592,250 shares of common stock
were to be issued to the LFC shareholders in exchange for all the issued and
outstanding shares of LFC common stock. LitFunding Corp, a California
corporation changed its name to California LitFunding on May 30, 2003. RP
Entertainment had no material operations, assets or liabilities prior to the
merger.

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


                                       5
<PAGE>


On April 2, 2003 certain individuals and entities filed an involuntary
bankruptcy petition against the Company in the United States Bankruptcy Court,
Central District of California. After numerous legal proceedings, in November
2003, the Company filed its voluntary Chapter 11 bankruptcy petition. In January
2004, the Company's wholly owned operating subsidiary, California LitFunding,
filed a voluntary Chapter 11 bankruptcy petition. The Company received
confirmation of its plan of reorganization from the United States Bankruptcy
Court on June 17th, 2004 (see Note 3).

As discussed in Note 3, the Company has entered into a Chapter 11 Plan of
Reorganization under the United States Bankruptcy Code. Liabilities exceed
assets by $2,226,005 at June 30, 2005. The Company's net loss for the period
ended June 30, 2005 is $1,802,957. The ability of the Company to continue as a
going concern remains dependent upon successful operation under the bankruptcy
plan, obtaining additional capital and financing, and generating positive cash
flow from operations. The Company intends to seek additional capital either
through debt or equity offerings and believes that increased volume and
reduction in its lead time to finance and collect on funded cases will
ultimately lead to profitability and positive cash flows. The financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   ------------------------------------------

Cash includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less. At times cash deposits may exceed government insured limits. At
June 30, 2005 there were no cash deposits that exceeded those insured limits.

Principles of consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, California
LitFunding, LitFunding USA and its wholly owned LLC's and a dormant company, E.
Evolution Expeditions whose name was changed to Silver Dollar Productions on
January 21, 2005. All significant intercompany accounts and transactions are
eliminated.

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is recorded on a straight-line basis over a period of the shorter
of the related applicable lease term or the estimated useful lives of the assets
ranging from 3 to 5 years. Depreciation expense for the periods ended June 30,
2005 and 2004 was $14,879 and $15,662 respectively.

Revenue recognition -The Company recognizes revenues earned for the fees charged
on the contingent advances upon successful resolution of the funded lawsuit. In
accordance with the guidelines of Staff Accounting Bulletin (SAB) 104 and
Statement of Financial Accounting Concepts (SFAC) No. 5, upon successful
resolution of the lawsuit, including appeals, the fees become realizable and
earned. At this time the fee is determinable and the collection ensured. Fees
are determined as set forth in the individual contracts. Fees are generally
progressive the longer the time period for which the advances are outstanding.
Fees are not earned until there is successful resolution to the related legal
matter. The Company has begun to make contingent advances on so called post
settlement lawsuit matters. In these instances all appeals have been exhausted
and the fee is both determinable and collection ensured at the time the advances
are made.

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


                                       6
<PAGE>

Financial Instruments - Financial instruments consist primarily of cash,
accounts receivable, contingent advances, and obligations under accounts
payable, accrued expenses, debentures, capital lease obligations, notes payable
and investor participation obligations. The carrying amounts of cash, accounts
receivable, accounts payable and accrued expenses approximate fair value because
of the short maturity of those instruments. The carrying value of the Company's
contingent advances approximate fair value because the Company provides
allowances for any estimated uncollectible amounts. The carrying value of
debentures and notes payable approximate fair value because they contain market
value interest rates and have specified repayment terms. The participation
obligations at June 2005 are carried at the expected repayment amounts as
determined by the individual notes. Obligations under capital leases approximate
fair value because the original balances approximated the fair value of the
underlying equipment at the time the obligations were incurred. The Company has
applied certain assumptions in estimating these fair values. The use of
different assumptions or methodologies may have a material effect on the
estimates of fair values.

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

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

The Company adopted the 2004 Stock Option Plan on August 6, 2004, and 1,490,000
options were granted under the plan to key employees since that date and through
June 30, 2005. Prior to adopting the plan, options had been granted to key
employees of which 952,500 had not expired and were still outstanding at June
30, 2005. As of June 30, 2005 there are 2,020,000 that have not expired and are
still outstanding. The 2004 Stock Option Plan provides for the total number of
shares of common stock of the Company which may be purchased pursuant to the
exercise of options to not exceed, in the aggregate, 30% of the then issued and
outstanding common stock of the Company. The Compensation Committee of the Board
of Directors may grant options only to directors, officers, other salaried key
employees of the Company and other qualified individuals or entities, including,
but not limited to, independent contractors and consultants of the Company.

The Company has issued stock options from time to time to executives, key
employees and members of the Board of Directors. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," and continues to account for
stock based compensation using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Accordingly, no compensation cost has been recognized for the stock
options granted to employees. Had compensation cost for the Company's stock
options been determined based on the fair value at the grant date for awards in
2004 and 2003, consistent with the provisions of SFAS No. 123, the Company's net
income (loss) per share would have been increased to the pro forma amounts
indicated below.


                                              June 30, 2005       June 30, 2004
                                              --------------     ---------------
Net income (loss) - as reported               $  (1,802,957)     $   (2,919,762)
                                              ==============     ===============
Net income (loss) - pro forma                 $  (2,075,657)     $   (2,919,762)
                                              ==============     ===============
Income (loss) per share - as reported         $       (0.13)     $        (0.31)
                                              ==============     ===============
Income (loss) per share - pro forma           $       (0.15)     $        (0.31)
                                              ==============     ===============


                                       7
<PAGE>


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The minimum value method was used because
the Company's stock did not trade for the period year ended June 30, 2004. The
following assumptions were used in imputing value for options granted in six
months ended June 30, 2005:
                                         2005                 2004
                                         ----                 ----
Dividend yield                           None                 None
Volatility                                392%                 N/A
Risk free interest rate                  3.15%                3.00%
Expected asset life                      5 years              3 years

The summary of activity for the Company's stock options/warrants is presented
below:


<TABLE>
<CAPTION>
                                                   6 months ended                  Year ended
------------------------------------------------------------------------------------------------------------
                                                    June 30,2005               December 31, 2004

                                                                     Weighted                      Weighted
                                                                     Average                       Average
                                                                     Exercise                      Exercise
                                                                     Price                         Price
                                                                     --------                      --------
    <S>                                                    <C>           <C>           <C>           <C>
Options/warrants outstanding at beginning of            3,592,500       $0.30       1,549,500      $ 0.54
period
Granted                                                 1,715,000       $0.34       2,075,000      $ 0.21
Exercised                                                (845,000)      $0.06           - 0 -
Terminated/Expired                                                                    (32,000)     $ 1.00
Options/warrants outstanding at end of period           4,462,500       $0.37       3,592,500      $ 0.30
Options/warrants exercisable at end of period           4,462,500       $0.37       3,592,500      $ 0.30
Options/warrants available for grant at end of          2,401,019                   2,406,019
period

Price per share of options outstanding                 $0.01-$7.00                  $0.01-$7.00

Weighted average remaining contractual lives            4.33 years                   2.05 years

Weighted Average fair value of options granted
during the period                                                      $ 0.44                       $0.21
</TABLE>


During the six months ended June 30, 2005, included in the table discussed
above, the Company issued 1,185,000 warrants of which 375,000 were exercised in
during the year 2005. The warrants were issued to both non-employees for
services and to Directors of the Company. The warrants issued to Directors of
the Company were part of the compensation package promised to Directors in
August 2004 and are priced accordingly. During the period ended June 30, 2005,
the company recognized an expense of $197,965 related to the issuance of
warrants and options to directors, officers, and employees. These options and
warrants had intrinsic value of approximately $0.33 per share at the grant date.
During the same period we granted 530,000 options from the Stock Option Plan to
officers and employees.

Additionally, options and warrants were granted to non-employee consultants. The
total amount expensed relative to these grants was $175,000 and $300,014 during
the three and six month periods ended June 30, 2005 respectively.

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


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

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

Recently Issued Accounting Pronouncements: In April 2003, the FASB issued SFAS
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities," effective for contracts entered into or modified after June 30,
2003. This amendment clarifies when a contract meets the characteristics of a
derivative, clarifies when a derivate contains a financing component and amends
certain other existing pronouncements. The adoption of SFAS No. 149 did not have
a material effect on the Company's financial statements.


                                       8
<PAGE>

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

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

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

   In December 2004 the FASB issued a revised Statement 123 (SFAS 123R),
"Accounting for Stock-Based Compensation" requiring public entities to measure
the cost of employee services received in exchange for an award of equity
instruments based on grant date fair value. The cost will be recognized over the
period during which an employee is required to provide service in exchange for
the award -- usually the vesting period. The amended effective date for this
statement is January 1, 2006. The Company is evaluating the impact of this new
pronouncement and has not yet estimated the effect of implementation on the
Company's financial statements.


3. BANKRUPTCY PETITION AND REORGANIZATION
   --------------------------------------

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

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


                                       9
<PAGE>

     In February of 2004, this litigation was settled. The settlement reached by
and among the Company and the petitioning creditors has been incorporated into a
reorganization plan confirmed by the United States Bankruptcy Courts on June
17th, 2004.

    During 2004 and 2003, California LitFunding, as the operating entity, held
title to substantially all of the assets of The Company. The core assets within
California LitFunding, and those with most of the value, were the Settlement
Agreements, which were the primary subject of the litigation indicated with the
filing of the involuntary bankruptcy petition on April 2, 2003. A total of
approximately $18.6 million dollars was invested through those Settlement
Agreements.

    Pursuant to the plan of reorganization, LitFunding Corp and California
LitFunding had the option to voluntarily transfer the control and the collection
of the settlement agreements ("the Contract Pool") to an IEP distribution agent
(the `Contract Agent') for the benefit of the IEP claimants who comprise class 6
under the terms of the reorganization plan.

    LitFunding Corp, California LitFunding and the IEP claimants stipulated and
agreed to do this in December 2004. In that stipulation, the Contract Agent
would assume full control and administration over the `Contract Pool' and have
full authority over the enforcement of the obligations set forth in the
settlement agreements that comprise the Contract Pool.

    Per the agreement signed on November 30th, 2004, LitFunding Corp and
California LitFunding transferred all of the original records and files to the
Contract Agent on December 16th, 2004, and sent written notice to all parties
subject to the settlement agreement notifying them of the transfer of control of
the Contract Pool and settlement agreements to the Contract Agent including the
assignment of LitFunding Corp and California LitFunding's legal rights and that
all payments are now payable to the Contract Agent.

    As a result of the transfer, the Company was effectively relieved of the
obligation due to the IEP claimants of IEP Note of approximately $26,662,000
including related accrued interest. The carrying value of receivables and
advances at the time of the transfer was approximately $12,331,000 resulting in
a gain on the transfer of $14,131,000 for the year ended December 31, 2004. The
original value of the IEP Note was determined based on the stipulations within
the bankruptcy plan. In the transfer, the Company transferred all of its rights
to the contingent advances and any potential earnings thereon. Because payments
on the IEP Note were only to come from collections and earnings on the
contingent advances, the Company is no longer responsible for that obligation.

    In consideration for the cooperation and support provided by LitFunding
Corp. and California LitFunding making the transition seamless and effective,
the IEP claimants waived and released LitFunding Corp and California LitFunding
from all liability arising under the "Contingent Recourse Note" of approximately
$1,560,000, which would have become effective in 2005.


                                       10
<PAGE>

Moreover, by effecting this transfer of the Contract Pool, the two other classes
of creditors (Class 4 and 5) affected by this transition will continue to
receive the benefit of the unsecured creditors' allocation as defined in the
plan of reorganization. The contingency administrative charge allowed by the
plan of reorganization to be paid to LitFunding Corp and California LitFunding
has ceased as a result of this transfer.

    As a result of the transfer of the contract pool to the IEP claimants
effective in December 2004, the Company recorded an extraordinary gain for the
removal the associated obligation and assets.

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

A.       Administrative and Priority Claims. The claims within this class total
         approximately $232,000 through June 30, 2005. Most of this amount
         represents the fees and costs payable to the Debtors general insolvency
         counsel, Winthrop Couchot, P.C. who accepted 200,000 shares of common
         stock from the company in April 2004 in part or full payment for the
         amount. The balance represents sums owed of approximately $9,300 in
         priority wages owed to two officers of the Debtors. These amounts are
         not subject to compromise and are included in accounts payable and
         accrued expenses in the accompanying balance sheet at December 31,
         2004;

B.       Gap Claims. During the period between the filing of the involuntary
         petition and the date on which LitFunding Nevada's stipulated to the
         entry of an order for relief, certain claims accrued. Substantially all
         of these claims accrued in favor of two law firms that were defending
         LitFunding Nevada against the involuntary filing. The Debtors reached
         an agreement with these claimants to pay $314,000 over twelve months.
         The remaining balance owed at June 30, 2005 is approximately $120,000
         These amounts are subject to compromise and are included in trade and
         miscellaneous claims in the accompanying balance sheet at December 31,
         2004;

C.       Debenture Claims. In calendar years 2002 and 2003 California LitFunding
         issued debentures to seven individuals, creating approximately two
         hundred thousand dollars ($200,000) in debt obligations. Included is a
         $10,000 debenture payable to a related party. These claims are
         unsecured and they are undisputed.

D.       Unsecured Claims Other Than Debenture Claims and IEP Claims. The
         Debtors have approximately $445,000 in allowed unsecured claims. These
         amounts are subject to compromise and are included in trade and
         miscellaneous claims in the accompanying balance sheet at June 30,
         2005;

E.       IEP Claims. Pursuant to the Settlement Agreement entered into by and
         between The Company and the IEP petitioning creditors, each and every
         claim held by the IEP petitioning creditors has been fixed in them
         Plan. The totality of all claims held by the IEP petitioning creditors
         has been incorporated into the non-recourse Plan Note. The Plan Note
         had an opening balance of $26,111,763. This obligation was relieved in
         connection with the transfer of the Contract Pool to the IEP Creditors
         in December 31, 2004;


                                       11
<PAGE>

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

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

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

The remaining bankruptcy liabilities at June 30, 2005 are summarized as follows:

 Gap Claims                                 $    120,000
 Unsecured Creditors and Other                   395,692
                                            ------------
     Subtotal                                    515,692

 Debentures                                      200,000
                                            ------------
                                            $    715,692
                                            ============


The Company intends to repay all obligations in full. Debenture Claims are
impaired as that termed is used in the Bankruptcy Code because obligations will
be paid out over a specified longer term. However, for accounting purposes, the
Company does not believe any of the obligations are compromised at June 30,
2005, based on the expected amount of allowed claims.

4. ACCOUNTS RECEIVABLE AND CONTINGENT ADVANCES
   --------------------------------------------

Accounts receivable represents unpaid amounts due for the return on contingent
advances and fees earned on cases in which there have been positive resolutions.
At June 30, 2005, accounts receivable consisted of eight advances totaling
$72,250 in earned fees. The accounts receivable amount of $72,250 reflects the
net fee income due to the company as of June 30, 2005.

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

Management estimates the net realizable value of contingent advances by
periodically reviewing the progress of the cases with the attorneys trying them
and past experience with similar cases. Management believes that the Company has
historically achieved a success rate of approximately 85% on cases that it has
funded. Post reorganization procedures and policies have been implemented and
management believes that it will achieve a success rate of no less than 90% on
new fundings. Management monitors all cases and provides an allowance if it
believes that any advances have been impaired. At June 30, 2005, there were
contingent advances outstanding of $690,000 and a corresponding impairment
allowance of $69,000.

The Company has sold 1,480,000 shares of its common stock to certain unrelated
qualified investors in exchange for $758,000 of notes receivable. These notes
are due on or before December 31, 2005. The Company has a reasonable expectation
that these notes will be paid before the year end.


5. PARTICIPATION OBLIGATIONS
   --------------------------

Prior to the filing of the involuntary petition on April 2, 2003, the Company
raised capital to enable it to engage in the practice of funding the contingent
advances by entering into so called IEP agreements. These are considered to be
investment/equity participation agreements the nature of which has been
redefined and fixed as part of plan of reorganization and the totality of all
claims held by the IEP petitioning creditors has been incorporated into the
non-recourse Plan Note. The non-recourse Plan Note had an opening balance of
$26,111,763 as of May 1, 2004 and as of May 1, 2004 included an approximate
$2,000,000 from the cancelled sale of stock and a predetermined retroactive
return. As discussed in note 3 above, the Contract Pool was transferred on
December 16, 2004, to the Contract Manager designated by the IEP Claimants.
Accordingly, this non-recourse plan note was removed from the balance sheet at
December 31, 2004, to reflect the economic reality of that transaction.


                                       12
<PAGE>


6.       DEBENTURES
         ----------

During the years ended December 31, 2002, the Company issued 5-year 9%
convertible debentures amounting to $200,000, due January 1, 2007. Included is
one debenture due to a related party for $10,000. Interest is due semi-annually
on the first day of June and December of each year, commencing June 1, 2003
until fully paid. As part of the plan of reorganization, these debentures have
an amended maturity to 2008.

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


7. DEBT
   ----

     Notes payable at June 30, 2005 are comprised of the following:

     Note payable to entity, original balance of $500,000,
     interest at 10% per annum.  Principal and interest due
     September 9, 2005. The Note is unsecured.                   $ 500,000

       Note payable with no  specified due date.  Face amount
       Of $15,000, interest at 10% per annum, the note is
       Unsecured                                                    15,000

     Notes payable to entity, original balance of $200,000,
     Interest at 10% to 12% per annum.  Principal and interest due
     September 13, 2005. The Note is unsecured.                    207,500
                                                                 ----------
                                                       Total     $ 722,500
                                               Debt Discount       (34,000)
                                                                 ----------
                                                                 $ 688,500
                                                                 ==========

8. STOCKHOLDERS' DEFICIT
   ---------------------

As discussed in Note 1, the Company entered into a merger agreement in January
2003, whereby 7,592,250 shares of its common stock were issued in exchange for
all the issued and outstanding shares of the common stock of California
LitFunding. The acquisition was a reverse acquisition of the Company by
California LitFunding, under the purchase method of accounting, and was treated
as a recapitalization with California LitFunding as the acquirer. Accordingly,
the historical financial statements have been restated after giving effect to
the January 23, 2003, acquisition of the Company.

During the six months ended June 30, 2005, the Company allowed one of its
officers to exercise the right to purchase 450,000 shares of common stock in
exchange for a corresponding offset to the officer's deferred salary of $45,000.
The value of these shares was determined by the quoted trading price of the
Company's common stock.

In the six months ended June 30, 2005, certain consultants and debtors exercised
their right to convert 395,000 warrants into common stock. The company has
recognized a deferred expense amounting to $238,788 related to those warrants
issued and related to debt of $500,000 of which $155,288 was recognized in the
current six month period as amortization of debt expense.

In the year ended December 31, 2004, the Company declared and issued an 11 for
10 stock dividend. As a result 1,042,501 shares were issued. The trading value
of the shares on the declaration date of November 1, 2004, was $0.70. The
aggregate value of the new shares issued of $729,751 was reclassified from the
accumulated deficit to additional paid-in capital.


9. INCOME TAXES
   ------------

The Company recognizes deferred income taxes for the differences between
financial accounting and tax bases of assets and liabilities. The Company has
elected to account for its income and expenses on a cash basis for income tax
purposes. Income taxes for the six months ended June 30, 2005 and 2004 consisted
of the following:

                                                      2005             2004
                                                      ----             ----
Current tax (benefit) provision                  $   (443,000)     $        -0-
 Deferred tax (benefit) provision                     443,000               -0-
                                                 -------------     ------------
Total income tax provision                       $         -0-     $        -0-
                                                 =============     ============


                                       13
<PAGE>

Net deferred income tax assets of $3,746,000, less a deferred income tax
liability of $8,000 are fully offset by a valuation allowance of $3,738,000 at
June 30, 2005. The valuation allowance was increased by $443,000 in the period
ended June 30, 2005.


10. COMMITMENTS AND CONTINGENCIES
    -----------------------------

OPERATING LEASE:

The Company rescinded its long-term property lease as allowed in Chapter 11
bankruptcy proceedings of the Federal Bankruptcy code and moved its offices to
Las Vegas, Nevada in October of 2004 where it occupied space on a month-to-month
lease from a related party until March 1, 2005, when it executed a 3-year lease
in an arms length transaction with an unrelated party. Rent expense under the
premises leases were $57,671 and $66,128 for the six months ended June 30, 2005
and 2004.

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


Future minimum annual lease payments under operating lease agreements for the
years ended December 31 are as follows:

     2005       2006       2007        2008      Thereafter      Total
  ----------- ----------- ----------- ----------- ----------- --------------
  $    56,763 $    75,112 $    73,800 $    12,360 $       -0- $      218,035

CONTINGENCIES:

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

The Company is involved in suits for breach of contract, fraud, conspiracy and
defamation with the same claimants in the United States Bankruptcy Court and
California State Court. The claimants allege that there was a finder's fee
agreement between them and the founding officers / shareholders of the company.
The Company's position is that there was a negotiated agreement with the
claimants, which was complied with. The claimants allege damages of $16 million.

In May 2004, the United States Bankruptcy Court upheld the company's objections
to all monetary claims. The claimants appealed this decision. Additionally, they
filed an adversary proceeding raising most of the issues already raised in the
first claims. In February 2005, the United States Bankruptcy Court partially
dismissed the claimant's adversary complaint and told the claimants to amend the
complaint to give them the opportunity to clarify their claims. The claimants
filed that amended complaint. In March 2005, the company filed a motion to
dismiss with prejudice the entire amended complaint on the grounds that the
claims therein were previously denied by the court in the bankruptcy proceeding.

The State Court action has been stayed pending resolution of the issues in the
United States Bankruptcy Court. The Federal Court's decisions in the company's
favor will preclude proceedings against the company in the state court action.


11. NET INCOME (LOSS) PER SHARE
    ---------------------------

Net income per share is calculated using the weighted average number of shares
of common stock outstanding during the year. Options/Warrants to purchase
4,462,500 to purchase common shares were not considered in the calculation for
diluted earnings per share for the six months ended June 30, 2005 and June 30,
2004. In accordance with SFAS No. 128, the control number used in determining
the dilutive effect of warrants and options is based on operating income, not
income after extraordinary item. Because the Company experienced a net operating
loss as of June 30, 2005, the effect of their inclusion based would be
anti-dilutive and hence, were not included.


The following summarizes the loss per share calculation for the six months
period ended June 30, 2005.


<TABLE>
<CAPTION>
                                                                     2005                                   2004
                                                     INCOME                      PER                                    PER
                                                     (LOSS)         SHARES      SHARE     INCOME (LOSS)     SHARES      SHARE
                                                  -------------- ------------- --------- --------------- ------------ ---------
<S>                                                    <C>            <C>         <C>           <C>            <C>       <C>
Net income (loss) before extraordinary item       $  (1,802,957)                          $  (2,919,762)
Extraordinary item                                       -0-                                     -0-
                                                  --------------                         ---------------
Total                                             $  (1,802,957)                          $  (2,919,762)

Preferred dividends                                      -0-                                     -0-

                                                  --------------                         ---------------
Income (loss) available to common stockholders
                                                  $  (1,802,957)                          $  (2,919,762)
                                                  ==============                         ===============

Basic Earnings (Loss) Per Share:
Loss available to common stockholders             $  (1,802,957)   13,400,327  $  (0.13)     (2,919,762)   9,410,850  $  (0.31)
                                                  --------------               --------- ---------------              ---------
Total                                             $  (1,802,957)   13,400,327  $  (0.13) $   (2,919,762)   9,410,850  $  (0.31)
                                                  ==============               ========= ===============              =========

Effect of dilutive securities                          N/A                                    N/A
</TABLE>





                                       14
<PAGE>



12. CONCENTRATION OF CREDIT RISK
    ----------------------------

The Company maintains cash balances at banks in California and Nevada. The
Federal Deposit Insurance Corporation up to $100,000 insures accounts.

Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily contingent advances and trade accounts receivable. All
of the trade accounts receivable at June 30, 2005 are due from four customers.

The Company's contingent advances are generally due from clients when the
litigating case in question is settled favorably. Substantially all cases are
being tried by lawyers in the state of California. Monies invested by the
Company plus fees become part of the Companies accounts receivable and are due
at that time less any settlement discount. The contingent advances balance at
June 30, 2005 is comprised of many advances to Attorneys. However, three
attorneys represent approximately 58% of the total balance at June 30, 2005. No
other single note or debtor comprises greater than 10% of the total balance at
June 30, 2005.

13. RELATED PARTY TRANSACTIONS
    --------------------------

During the year ended December 31, 2004, the Company entered into an agreement
with a non-independent Board member to lease office space on a month-to-month
basis. Rent expense recognized for the three months ended March 31, 2005 related
to this agreement was $13,957. This lease was terminated in March 2005. In
addition, this same Board member has a $10,000 debenture with the Company as
described in Note 6. The Company has recognized $450 in interest expense related
to this note through June 30, 2005.

In March 2005, we granted Robert Amira, our Executive Vice President 10,000
shares of common stock and 10,000 options to purchase shares of our common stock
at an exercise price of $0.97 per share, We also granted Dermot Ryan 10,000
options to purchase shares of our common stock at $0.97 per share. Mr. Ryan is
one of our employees, and was appointed as our Corporate Secretary in June 2005.

In June 2005, we granted Lloyd Schiller, our Vice President for Sales, 10,000
shares of our common stock along with options to purchase 10,000 shares of our
common stock at $0.56 per share.

In July 2005, we granted Terry Gabby, our Treasurer and Chief Financial Officer,
10,000 options to purchase shares of our common stock at $0.41 per share. Mr.
Hejmanowski, our director, was granted 150,000 shares of our common stock as a
signing bonus in July 2005.


14. SUBSEQUENT EVENTS
    -----------------

In August 2005, we sold 400,000 shares of our Series A 12% Convertible Preferred
Stock at $0.25 per share, or $100,000. These shares accrue annual dividends of
12% payable in cash or stock, at the board's discretion, and 6 months after the
date of purchase, each shares is convertible by either the Company or the holder
for two shares of the Company's common stock.


ITEM 2.  PLAN OF OPERATION
---------------------------

This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.


                                       15
<PAGE>

The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. We cannot guaranty
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.

Critical Accounting Policies and Estimates. Our Management's Discussion and
Analysis of Financial Condition and Results of Operations section discusses our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. These accounting policies are described at
relevant sections in this discussion and analysis and in the notes to the
financial statements included in our Quarterly Report on Form 10-QSB for the
period ended June 30, 2005

LitFunding Corp (formerly known as RP Entertainment, Inc.) was organized in the
state of Nevada on July 11, 1996. We own all of the common stock of California
LitFunding and LitFunding USA. and we are the holding company in this corporate
relationship. We have limited assets, no payroll, and no operations. In
contrast, our subsidiary, California LitFunding conducted substantially all
operations during 2004 and owned substantially all of the operating assets,
employed all personnel and paid the obligations of all the corporations.

We formed our second primary subsidiary, LitFunding USA on March 22nd 2004 and
it began assuming some operations in the last quarter of 2004 and in 2005
assumed responsibility for substantially all the operations of all the
corporations. As disclosed in earlier filings, California LitFunding became the
successor-in-interest to the original LitFunding Corp, a California corporation,
through a reverse triangular merger plan discussed in earlier filings.

We own 74.8% of the shares in another Nevada corporation called Silver Dollar
Productions (previously known as E.Evolution Expeditions) formed on February 25,
2000.

Our subsidiary, California LitFunding has been in the business of investing in
litigation recoveries since 2000 and it raised and advanced capital to various
law firms pursuant to "Settlement Agreements". These Settlement Agreements
provide that the funds advanced shall be repaid to California LitFunding, plus a
fee, when the lawsuits referenced in the agreement ultimately settle. The exact
amount of the fee payable on the funds advanced depends upon the length of time
the funds are outstanding, up to a fixed limit. Pursuant to the terms of the
Settlement Agreements, California LitFunding's contractual right to payment is
limited to the funds ultimately paid to the law firm from the specified lawsuit,
or lawsuits, in which the funds are invested or expended. We were unable to
effectively conduct this business during the period of litigation that began on
April 2, 2003 and ended with the US Bankruptcy Court entering an order


                                       16
<PAGE>


confirming a plan of reorganization on June 17, 2004. Our new subsidiary,
LitFunding USA resumed the business of advancing funds to plaintiffs' attorneys
after the June 17, 2004 date referenced above. LitFunding USA either uses its
own funds to pursue this business or the funds of its wholly owned limited
liability companies. As we have previously described in earlier filings, we
together with our subsidiary California LitFunding (the "Companies") have been
locked in litigation since April 2, 2003 when certain individuals and entities
of LitFunding Corporation, a Nevada corporation filed an involuntary bankruptcy
petition against us in the United States Bankruptcy Court, Central District of
California, Case Number:. LA03-19005 ES (the "Petition"). After lengthy costly
court proceedings, we subsequently converted to a voluntary chapter 11
proceeding whose plan of reorganization was confirmed on June 17, 2004.

Pursuant to the plan of reorganization, LitFunding Corp and California
LitFunding had the option to voluntarily transfer the control and the collection
of the settlement agreements ("the Contract Pool") to an IEP distribution agent
(the `Contract Agent') for the benefit of the IEP claimants who comprise class 6
under the terms of the reorganization plan.

LitFunding Corp, California LitFunding and the IEP claimants stipulated and
agreed to do this in December 2004. In that stipulation, the Contract Agent
would assume full control and administration over the `Contract Pool' and have
full authority over the enforcement of the obligations set forth in the
settlement agreements that comprise the Contract Pool.

Per the agreement signed on November 30, 2004, LitFunding Corp and California
LitFunding transferred all of the original records and files to the Contract
Agent on December 16, 2004, and sent written notice to all parties subject to
the settlement agreement notifying them of the transfer of control of the
Contract Pool and settlement agreements to the Contract Agent including the
assignment of LitFunding Corp and California LitFunding's legal rights and that
all payments are now payable to the Contract Agent.

As a result of the transfer, the Company was effectively relieved of the
obligation due to the IEP claimants of IEP Note of approximately $26,662,000
including related accrued interest. The carrying value of receivables and
advances at the time of the transfer was approximately $12,331,000 resulting in
a gain on the transfer of $14,131,000 for the year ended December 31, 2004. The
original value of the IEP Note was determined based on the stipulations within
the bankruptcy plan. In the transfer, the Company transferred all of its rights
to the contingent advances and any potential earnings thereon. Because payments
on the IEP Note were only to come from collections and earnings on the
contingent advances, the Company is no longer responsible for that obligation.

In consideration for the cooperation and support provided by LitFunding Corp.
and California LitFunding making the transition seamless and effective, the IEP
claimants waived and released LitFunding Corp and California LitFunding from all
liability arising under the "Contingent Recourse Note" of approximately
$1,560,000, which would have become effective in 2005.


Liquidity and Capital Resources.

As of June 30, 2005, we have cash of $28,076. We also had $72,250 in accounts
receivable, $621,000 in contingent advances less reserve of $69,000, $52,991 in
property and equipment and $748,000 in stock subscriptions receivable. We also
had $31,881 in other assets, making our total assets equal to $806,198 as of
June 30, 2005. Our current liabilities, not subject to compromise, as of June
30, 2005 were $2,316,511, which includes $613,158 represented by accounts
payable, $280,385 in accrued liabilities, $688,500 represented by a note payable
net of deferred debt discount in the amount of $11,500, $725,000 in
participation obligations and $9,468 in interest payable. As of June 30, 2005,
we also had $715,692 in liabilities subject to compromise, which included
$515,692 represented by trade claims and $200,000 in debentures. Our total
liabilities at June 30, 2005 were $3,032,203. We have no other long term
commitments or contingencies. We are holding stock subscription receivable notes
in the amount of $748,000 due on or before December 31, 2005. We do believe that
these notes will be paid before the due date. We do not believe our cash is
sufficient to pay our day to day expenses for the next twelve months.


                                       17
<PAGE>

For the three months ending June 30, 2005, we had a decrease in cash of $26,589.
We also had an increase of $33,500 in accounts receivable. Contingent advances,
less reserves of $73,500, decreased by $114,500. We had a decrease in property
and equipment of $7,047 and an increase in stock subscriptions receivable of
$215,000. We also had a decrease of $41,044 in other assets. Our total assets
decreased by $81,680 for the three months ending June 30, 2005. Our current
liabilities, not subject to compromise, for the three months ending June 30,
2005 increased by $279,472, which includes a increase of $139 represented by
accounts payable, an increase of $39,306 in accrued liabilities, a $289,573
increase represented by a note payable net of deferred debt discount in the
amount of $11,500 a decrease of $37,500 in participation obligations and a
$12,046 decrease in interest payable. For the three months ended June 30, 2005,
we also had a decrease of $266,869 in liabilities subject to compromise, which
were represented by trade claims. The debentures amount of $200,000 remained
unchanged. Our total liabilities increased $212,603 for the three months ending
June 30, 2005. We have no other long term commitments or contingencies. We are
holding stock subscription receivable notes in the amount of $748,000 due on or
before December 31, 2005. We do believe that these notes will be paid before the
due date.

Our principal capital requirements during the year 2005 are to fund the internal
operations, continue to pay for the defense of the litigation described in Part
II, Item 1, below, and fund the restart of the business subsequent to the
confirmation of the reorganization plan. We plan to raise necessary funds by
selling shares of our common stock or through the sale of interest bearing
debentures to selected investors or a combination of these. We will also
consider establishing relationships with selected business partners whose
contributions could include necessary cash. As discussed below, we believe that
we will generate sufficient cash flow to make payments on the bankruptcy
liabilities in accordance with the Plan.

Initially, it is anticipated that the new funding will be obtained from private
parties and investment groups, and that this funding will be in the form of
loans. The financing party will be granted a first priority lien on all of the
lawsuits that they advance money to. Once the obligations owed to the capital
source are satisfied, we anticipate our subsidiary LitFunding USA will receive
the balance of the fees earned. In addition to these sources of funds, we filed
an SB-2 registration statement on December 30, 2004 registering 4,000,000
shares. The Securities Exchange Commission declared this registration statement
effective in January 2005. 2,000,000 of these shares have been sold. On April
12, 2005, we filed a post-effective amendment to change the offering price on
the remaining 2,000,000 shares to $1.25. We are currently addressing SEC
comments to our post-effective amendment.

The industry in which we operate is extremely competitive and include major
corporations with substantially greater resources than the Company, including
but not limited to, financial, personnel and established relationships in the
industry. Additionally, we face the challenge of having to reestablish our
credibility and presence in the market place after defending ourselves in the
bankruptcy litigation.

For the three and six months ended June 30, 2005
-------------------------------------------------

Results of Operations.

For the three months ending June 30, 2005 we had gross revenues of $137,500 and
incurred a net loss of $957,201 as compared to gross revenues of $1,284,489 and
a net loss of $1,003,444 for the same period in 2004. Revenues for the second
quarter ending June 30, 2005 of $137,500 compared to the first quarter ending
March 31,2005 of $10,375 reflect the beginning effects of our marketing strategy
as we concentrate on restarting our business. We incurred an increase of our
total liabilities over total assets of $294,283 for the three month period
ending June 30, 2005 as compared to March 31,2005.

As shown in the accompanying financial statements, we had gross revenues of
$147,875 and incurred a net loss of $1,802,957 for the six months ended June 30,
2005 as compared to gross revenues of $1,815,679 and a net loss of $2,919,762
for the same period in 2004. Because of the bankruptcy proceedings, we were
forced to curtail our marketing activities and only after our plan of
reorganization was confirmed in June 2004, were we able to concentrate on
restarting our business. Our operating cycle is typically longer than one year.
We anticipate lower revenue volumes in the near term as we begin our fund
raising efforts and begin the booking of new advances to attorneys. The vast
majority of the new advances will be considered "contingent" until such time as
there is definitive resolution on the underlying cases. As a result, and in
conformity with GAAP, we will not recognize fee income or revenue on these
advances until resolution is definitive. Our total liabilities exceeded our
total assets by $2,226,005 at June 30, 2005 compared to $18,005,758 at June 30,
2004. As of the six months ended June 30, 2005, if we made no further advances
to attorneys, our management estimates that we can reasonably expect to collect
approximately $1.250 million in fees and return of principal over the next 3-18
months from open cases. The estimate is based on historical performance and
other factors affecting each case.


                                       18
<PAGE>

OPERATING ACTIVITIES: During the three months ended June 30, 2005, net cash
used by operating activities increased by $354,688 compared to a net cash
increase in operating activities of $21,673 during the same period in 2004.The
increase in net cash used by operating activities resulted primarily because of
the successful confirmation of the reorganization plan and the restart of the
business in late 2004 which intensified in the first and second quarter of 2005.

In the second quarter ending June 30,2005 we funded approximately $253,000 in
litigation advances. Demand for our product remains strong and because of our
improved procedures, we continue to turn away more funding requests than those
that we approve. We continue with our efficiency drive evidenced by the fact
that our general and administrative expenses for the three months ended June 30,
2005 were $743,786 compared with $1,025,090 for the similar period in 2004. The
general and administrative expenses were reduced during the six months ending
June 30, 2005 by management's implementation of cost cutting measures. The
general and administrative expenses for the three months ended June 30, 2005
does include approximately $12,674 related to the value of warrants and options
issued as compensation during the first six months of 2005. Interest expense for
the three month period ended June 30, 2005 was $134,136 compared to $(1,094,019)
for the similar period in 2004. Interest expense for the three months ended June
30,2005 does include $117,073 related to debt discount recognized as a result of
warrants issued that attached to debt.

During the six months ended June 30, 2005, net cash used by operating activities
increased to $1,078,012 compared to net cash used in operating activities of
$34,953 during the same period in 2004. In the first half of 2005 we funded
approximately $600,000 in litigation advances. Demand for our product remains
strong and because of our improved procedures, continue to turn away more
funding requests than those that we approve. We continue with our efficiency
drive evidenced by the fact that our general and administrative expenses for the
six months ended June 30, 2005 were $1,530,539 compared with $1,996,868 for the
similar period in 2004. The general and administrative expenses were reduced
during the six months ending June 30, 2005 by management's implementation of
cost cutting measures. The general and administrative expense for the six months
ended June 30, 2005 does include approximately $197,965 related to the value of
warrants and options issued during the first six months of 2005. Interest
expense for the six month period ended June 30, 2005 was $221,202 compared to
$2,033,357 for the similar period in 2004. Interest expense for the six months
ended June 30, 2005 does include $185,890 related to debt discount recognized as
a result of warrants issued that attached to debt. This difference clearly
reflects our significant drop in debt load that resulted from the return of the
pre-Petition for Bankruptcy portfolio of cases and attendant debt, that was
transferred to the IEP creditors in December 2004. This is explained more fully
in Part 11, item 1, below.

Our Plan of Operation for the Next Twelve Months. To effectuate our business
plan during the next twelve months, we have restarted the marketing of our
products and increased our product offerings. Demand for financing continues to
remain strong and we have a backlog of requests for advances that we look
forward to begin satisfying as soon as we have secured new capital or financing.
Effective October 8, 2004 we moved operations to the State of Nevada to take
advantage of the prevailing tax structure, business climate and commercial
lending laws in that state. Additionally, we still intend to start marketing of
a new full recourse loan product in 2005. We believe that full recourse loans,
which we anticipate will eventually become approximately 10% of our core
business, will limit our exposure to losses, allow for earlier recognition of
revenue and at the same time answer the demand in the legal community for more
traditional borrowing facilities that carry a lower interest rate compared to
the fees we currently charge for our non recourse advance product. We intend to
expand our geographic market penetration and will explore opportunities to
acquire assets or other companies in this industry.

We have cash of approximately $28,000 as of June 30, 2005. In the opinion of
management, available funds will not satisfy our working capital requirements
for the next twelve months. Nevertheless, we believe our reorganization plan
provides for sufficient revenue to sustain operations. Our forecast for the
period for which our financial resources will be adequate to support our
operations involves significant risks and uncertainties and actual results could
fail as a result of a number of factors.

We will also need to raise funds to continue to implement our business plan. We
plan to raise these funds through private parties and institutions or other
equity offerings including interest bearing debentures. We may attempt to secure
other loans from lending institutions or other sources. We will also consider
establishing relationships with selected business partners whose contributions
could include necessary cash. There is no guarantee that we will be able to
raise additional funds through offerings or other sources. If we are unable to
raise funds, our ability to continue with operations will be materially
hindered.


                                       19
<PAGE>

We do not anticipate that we will purchase or sell any significant equipment but
we did enter into a medium-term lease in Las Vegas, Nevada. In the event that we
generate significant revenues and expand our operations, then we may need to
hire additional employees or independent contractors as well as purchase or
lease additional equipment.

Off-Balance Sheet Arrangements. There are no off balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.

Item 3. Controls and Procedures
--------------------------------

(a) Evaluation of disclosure controls and procedures. We maintain controls and
procedures designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed as of March 31,
2005, our chief executive officer and the principal financial officer concluded
that our disclosure controls and procedures were adequate.

(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.


                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.
---------------------------

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

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

In February of 2004, we settled this litigation. The settlement reached by and
among the Company and the petitioning creditors has been incorporated into a
reorganization plan confirmed by the United States Bankruptcy Courts on June
17th, 2004.

During 2004 and 2003, California LitFunding, as the operating entity, held title
to substantially all of the assets of The Company. The core assets within
California LitFunding, and those with most of the value, were the Settlement
Agreements, which were the primary subject of the litigation indicated with the
filing of the involuntary bankruptcy petition on April 2, 2003. A total of
approximately $18.6 million dollars was invested through those Settlement
Agreements.


                                       20
<PAGE>

Pursuant to the plan of reorganization, we had the option to voluntarily
transfer the control and the collection of the settlement agreements ("the
Contract Pool") to an IEP distribution agent (the `Contract Agent') for the
benefit of the IEP claimants who comprise class 6 under the terms of the
reorganization plan.

We and the IEP claimants stipulated and agreed to do this in November 2004. In
that stipulation, the Contract Agent would assume full control and
administration over the `Contract Pool' and have full authority over the
enforcement of the obligations set forth in the settlement agreements that
comprise the Contract Pool.

Per the agreement signed on November 30th, 2004, we transferred all of the
original records and files to the Contract Agent on December 16th, 2004, and
sent written notice to all parties subject to the settlement agreement notifying
them of the transfer of control of the Contract Pool and settlement agreements
to the Contract Agent including the assignment of LitFunding Corp and California
LitFunding's legal rights and that all payments are now payable to the Contract
Agent.

As a result of the transfer, we were effectively relieved of the obligation due
to the IEP claimants of IEP Note of approximately $26,662,000 including related
accrued interest. The carrying value of receivables and advances at the time of
the transfer was approximately $12,331,000 resulting in a gain on the transfer
of $14,131,000 for the year ended December 31, 2004. The original value of the
IEP Note was determined based on the stipulations within the bankruptcy plan. In
the transfer, we transferred all of our rights to the contingent advances and
any potential earnings thereon. Because payments on the IEP Note were only to
come from collections and earnings on the contingent advances, we are no longer
responsible for that obligation.

In consideration for the cooperation and support provided by us for making the
transition seamless and effective, the IEP claimants waived and released
LitFunding Corp and California LitFunding from all liability arising under the
"Contingent Recourse Note" of approximately $1,560,000, which would have become
effective in 2005.

Moreover, by effecting this transfer of the Contract Pool, we believe that the
two other classes of creditors (Class 4 and 5) affected by this transition will
continue to receive the benefit of the unsecured creditors' allocation as
defined in the plan of reorganization. The contingency administrative charge
allowed by the plan of reorganization to be paid to us has ceased as a result of
this transfer.

    As a result of the transfer of the contract pool to the IEP claimants
effective in December 2004, we recorded an extraordinary one time non cash gain
for the removal the associated obligation and assets.

Our primary liabilities are summarized in the following paragraphs:

I.       Administrative and Priority Claims. The claims within this class total
         approximately $232,000 through June 30, 2005. Most of this amount
         represents the fees and costs payable to the Debtors general insolvency
         counsel, Winthrop Couchot, P.C. who accepted 200,000 shares of common
         stock from the company in April 2004 in part or full payment for the
         amount. The balance represents sums owed of approximately $9,300 in
         priority wages owed to two officers of the Debtors. These amounts are
         not subject to compromise and are included in accounts payable and
         accrued expenses in the accompanying balance sheet at June 30, 2005;

J.       Gap Claims. During the period between the filing of the involuntary
         petition and the date on which LitFunding Nevada's stipulated to the
         entry of an order for relief, certain claims accrued. Substantially all
         of these claims accrued in favor of two law firms that were defending
         LitFunding Nevada against the involuntary filing. The Debtors reached
         an agreement with these claimants to pay $314,000 over twelve months.
         The remaining balance owed at June 30, 2005 is approximately $120,000
         These amounts are subject to comprise and are included in trade and
         miscellaneous claims in the accompanying balance sheet at June 30,
         2005;


                                       21
<PAGE>

K.       Debenture Claims. In calendar years 2002 and 2003 California LitFunding
         issued debentures to seven individuals, creating approximately two
         hundred thousand dollars ($200,000) in debt obligations. Included is a
         $10,000 debenture payable to a related party. These claims are
         unsecured and they are undisputed.

L.       Unsecured Claims Other Than Debenture Claims and IEP Claims. The
         Debtors have approximately $482,000 in allowed unsecured claims. These
         amounts are subject to comprise and are included in trade and
         miscellaneous claims in the accompanying balance sheet at June 30,
         2005;

M.       IEP Claims. Pursuant to the Settlement Agreement entered into by and
         between The Company and the IEP petitioning creditors, each and every
         claim held by the IEP petitioning creditors has been fixed in them
         Plan. The totality of all claims held by the IEP petitioning creditors
         has been incorporated into the non-recourse Plan Note. The Plan Note
         had an opening balance of $26,111,763. This obligation was relieved in
         connection with the transfer of the Contract Pool to the IEP Creditors
         in December 31, 2004;

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

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


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

We intend to repay all obligations in full. Debenture Claims are impaired as
that termed is used in the Bankruptcy Code because obligations will be paid out
over a specified longer term. However, for accounting purposes, we do not
believe any of the obligations are compromised at June 30, 2005, based on the
expected amount of allowed claims.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
---------------------------------------------------------------------

(a) Unregistered Sales of Equity Securities.

In April 2005, we issued Andrew Green, one of our LLC investors, 25,000 shares
of our common stock pursuant to the terms of a promissory note with Mr. Green,
as payment of $12,500 in interest due him, valuing the shares at $0.50 per
share. Mr. Green also exercised 125,000 of his warrants at $0.01 per share, or
$1,250, in exchange for 125,000 shares of our common stock. The proceeds were
used for working capital. These transactions were not registered under the Act
in reliance on the exemption from registration in Section 4(2) of the Act, as
transactions not involving any public offering. Mr. Green, who by virtue of his
relationship with us, was familiar with our business and was able to assess the
risks and merits of the investment.

In April 2005, we issued 80,000 shares in settlement of a disputed claim filed
against us and against California LitFunding in April 2004. The amended claim
was for $298,110, and while we believe the claim to be unfounded, to avoid
further litigation, we reached a settlement with the claimant in February 2005
for $75,000, and which was approved by the bankruptcy court in March 2005. We
issued 80,000 shares of our common stock to this claimant, in a transaction
which we believe was exempt from registration pursuant to section 1145 of the
bankruptcy code. In June 2005, 8,000 shares were issued pursuant to our stock
split in November 2004, representative of the dividend owed the claimant by
virtue of the 80,000 shares issued pursuant to the bankruptcy plan. The dividend
shares were issued pursuant to an order of the bankruptcy court.


                                       22
<PAGE>

In June 2005, we issued Steven Rubenstein 49,500 shares pursuant to the
bankruptcy reorganization in settlement of our debt to Mr. Rubenstein in the
amount of $59,000. These shares were issued as exempt from registration in
reliance on section 1145 of the bankruptcy code and pursuant to the plan of
bankruptcy reorganization and the bankruptcy court's order. These shares were
not subject to the dividend arrangement as were Ms. Lesavoy's shares. We did not
receive any proceeds from the issuance of these shares because these shares were
issued in lieu of repaying this creditor in cash.

In June 2005, we issued David Sokol a total of 13,592 shares and Kathleen Sauer
a total of 6,796 shares pursuant to the bankruptcy reorganization in settlement
of our debt to them, valuing the shares at $0.515 each. These shares were issued
pursuant to the bankruptcy reorganization and bankruptcy court's order. This
transaction was not registered under the Act in reliance on the exemption from
registration in Section 4(2) of the Act, as a transaction not involving any
public offering and issuable to debtors without any action required on their
part. We did not receive any proceeds from the issuance of these shares because
these shares were issued in lieu of repaying these creditors in cash.


In June 2005, we also granted Lloyd Schiller, our Vice President of Sales and
one of our employees, 10,000 shares of our common stock. We also granted Azra
Bailey, one of our employees, 15,000 shares of our common stock. These
transactions were not registered under the Act in reliance on the exemption from
registration in Section 4(2) of the Act, as transactions not involving any
public offering. The securities were issued to our officers and employees, who
by virtue of that relationship were familiar with our business and were able to
assess the risks and merits of the investment.


In June 2005, we issued Andrew Green 25,000 shares of our common stock upon his
exercise of warrants previously issued by us. This transaction was not
registered under the Act in reliance on the exemption from registration in
Section 4(2) of the Act, as transactions not involving any public offering. The
securities were issued to Mr. Green, who by virtue of his relationship with us,
was familiar with our business and was able to assess the risks and merits of
the investment.

In August 2005, we sold 400,000 shares of our Series A 12% Convertible Preferred
Stock at $0.25 per share, or $100,000. These shares are unregistered. These
shares are offered and sold in transactions which we believe satisfies the
requirements of Regulation S.

(b) Use of Proceeds. During the six months ended June 30, 2005, we sold
2,000,000 shares of our common stock at $0.41 per share pursuant to our
registration statement on Form SB-2 filed with the SEC on December 30, 2004. The
class of securities registered was our Common Stock, par value $.001. Pursuant
to Section 701(f) of Regulation S-K of the Exchange Act, we are providing the
following information with respect to the use of proceeds from the Form SB-2
Registration Statement declared effective by the SEC on January 31, 2005, File
No. 333-121802.

After the sale of 2,000,000 shares at $0.41 per share, we filed a post effective
amendment to the Form SB-2 Registration Statement to amend the offering price to
$1.25 per share for the remaining 2,000,000 shares so registered. The aggregate
offering price of the $0.41 shares was $820,000. We received $229,550 in cash
and $584,250 in promissory notes for those shares; however, on April 29, 2005,
we cancelled the subscriptions for 125,000 of those shares, for which we had
received $51,250 in promissory notes, since we did not receive proper
documentation from those prospective purchasers. On April 29, 2005, we received
$51,250 in cash for those 125,000 shares from another investor; in addition, we
received $10,000 in June 2005 for the subscription noted above, therefore, to
date, we have received a total $290,800 in cash and $748,000 in promissory notes
for those 2,000,000 shares. On April 22, 2005, we received an additional
subscription for 180,000 shares.

Of the $290,000 in cash we have raised, we have advanced approximately $25,000
in litigation funding, paid approximately $140,000 in salaries and employee
benefits, $30,000 in rent and D&O insurance, approximately $67,000 in other
general and administrative expenses. We have not yet used approximately $28,000.
The only expenses incurred in the sale were professional fees of approximately
$15,000. There was no underwriter expense or any direct or indirect payments to
any officer, director or affiliate.


                                       23
<PAGE>


Item 3. Defaults Upon Senior Securities
---------------------------------------

There has not been a default on senior securities

Item 4.  Submission of Matters to Vote of Security Holders
------------------------------------------------------------

None.

Item 5.  Other Information
----------------------------

None.

Item 6.  Exhibits
-------------------

         31.1 Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer

         31.1 Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer

         32. Section 1350 Certification by Chief Executive Officer

         32. Section 1350 Certification by Chief Financial Officer






                                       24
<PAGE>



                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                         LitFunding Corp.


August 23, 2005                     By:  /s/ Morton Reed
                                         --------------------------------------
                                         Morton Reed, President and
                                         Chief Executive Officer