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

                               AMENDMENT NO. 1 TO
                                   FORM 10-QSB



(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934     For the transition period from             to
                                              -------------  ----------------

                        Commission File Number: 000-49679

                     LitFunding Corp. (Debtor-in-Possession)
                     ---------------------------------------
             (Exact name of registrant as specified in its charter)

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

5455 Wilshire Blvd, Suite 2123 , Los Angeles, CA                         90036
-------------------------------------------------------- ----------------------
(Address of principal executive offices)                            (Zip Code)

                                  323 857 0448
                                  ------------
              (Registrant's Telephone Number, Including Area Code)



Check whether the issuer 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 CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of May 21, 2004, there were
9,410,850 shares of the issuer's $.001 par value common stock issued and
outstanding. As of May 21, 2004, there were no shares of the issuer's preferred
stock issued and outstanding.

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

Check whether the registrant 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        No n/a

Transitional Small Business Disclosure Format (Check One):   Yes    No  (x)





                                       1
<PAGE>



PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


LITFUNDING, CORP.
(Debtor-in-Possession)
Consolidated Balance Sheet at March 31, 2004 (UNAUDITED)

<TABLE>
<CAPTION>
ASSETS
<S>                                                                                                  <C>
   Cash and cash equivalents                                                                 $          36,393
   Accounts receivable, net of allowance for doubtful accounts of $633,921                             950,882
   Contingent advances less reserve for unsuccessful
        resolutions of lawsuit of $2,937,574                                                         8,812,726
   Property and equipment, net of accumulated depreciation of $49,196                                   75,971
   Other assets                                                                                         19,435
                                                                                             ------------------
TOTAL ASSETS                                                                                 $       9,895,407
                                                                                             ==================

LIABILITIES AND STOCKHOLDERS' DEFICIT:
 Liabilities Not Subject to Compromise -
  Accounts payable                                                                           $         126,736
  Accrued liabilities                                                                                  247,870
                                                                                             ------------------
     Total liabilities not subject to compromise                                                       374,606
                                                                                             ------------------

 Liabilities Subject to Compromise -
  Investor participation obligations                                                                18,814,550
  Trade and other miscellaneous claims                                                                 666,362
  Lease payable                                                                                         23,245
  Interest payable                                                                                   6,818,957
  Debentures                                                                                           200,000
                                                                                             ------------------
     Total liabilities subject to compromise                                                        26,523,114

                                                                                             ------------------
      Total liabilities                                                                             26,897,720
                                                                                             ------------------

STOCKHOLDERS' 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, 9,410,850 issued and outstanding                                                        9,411

   Additional paid-in capital                                                                        3,605,900
   Accumulated deficit                                                                             (20,617,624)
                                                                                             ------------------
      Total stockholders' equity                                                                   (17,002,313)
                                                                                             ------------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                  $       9,895,407
                                                                                             ==================
</TABLE>





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

                                       2
<PAGE>



LITFUNDING CORP.
(Debtor-in-Possession)
Consolidated Statements of Operations for the THREE MONTH PERIODS ended
March 31, 2004 and 2003 (UNAUDITED)
<TABLE>
<CAPTION>
   <S>                                                                          <C>                  <C>
                                                                                2004                2003
                                                                           ----------------    ---------------
NET REVENUE                                                                $       531,190     $      162,495

OPERATING EXPENSES:
     Selling                                                                             -            288,366
     Reserve for doubtful accounts receivable                                      403,001                  -
     General and administrative expenses                                           971,778            706,025
                                                                           ----------------    ---------------
         Total expenses                                                          1,374,779            994,391
                                                                           ----------------    ---------------

LOSS FROM OPERATIONS                                                              (843,589)          (831,896)
                                                                           ----------------    ---------------

OTHER (INCOME) AND EXPENSES
     Interest (expense), net of interest income                                   (939,338)          (932,711)
     Rental income                                                                   6,609                  -

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

     Total other income (expense)                                                 (932,729)          (932,711)
                                                                           ----------------    ---------------

(LOSS) BEFORE REORGANIZATION ITEMS AND INCOME TAXES                             (1,776,318)        (1,764,607)

REORGANIZATION ITEMS:
    Legal fees                                                                     140,000                  -
                                                                           ----------------    ---------------
(LOSS) INCOME BEFORE INCOME TAXES                                               (1,916,318)        (1,764,607)

INCOME TAX (BENEFIT) PROVISION                                                           -              1,600
                                                                           ----------------    ---------------

NET INCOME (LOSS)                                                          $    (1,916,318)    $   (1,766,207)
                                                                           ================    ===============

NET (LOSS) PER SHARE:
  Basic                                                                    $         (0.20)    $        (0.28)
                                                                           ================    ===============

  Diluted                                                                  $         (0.20)    $        (0.28)
                                                                           ================    ===============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  Basic                                                                          9,410,850          6,380,542
                                                                           ================    ===============

  Diluted                                                                        9,410,850          6,380,542
                                                                           ================    ===============
</TABLE>





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

                                       3
<PAGE>


LITFUNDING CORP.
(Debtor-in-Possession)
Consolidated Statements of Cash Flows for the
THREE MONTH PERIODS Ended March 31, 2004 and 2003 (UNAUDITED)


<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:                                         2004              2003
                                                                         ----------------  ----------------
  <S>                                                                           <C>                <C>
  Net loss                                                               $    (1,916,318)  $    (1,766,207)
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
  Depreciation and amortization                                                    7,830             6,637
  Reserve for unsuccessful resolution of lawsuits                                 28,107           184,847
  Reserve for bad debts                                                          145,846                 -
  Deferred compensation                                                                -             9,750
  Changes in assets and liabilities:
    Trade and other accounts receivable                                         (356,625)          308,741
    Contingent advances                                                          882,050           (47,001)
    Prepaid commissions on contingent advances                                         -           197,720
    Deposits                                                                           -             3,089
    Accounts payable and accrued expenses                                        255,102           (59,970)
    Interest payable                                                             940,728           846,107
                                                                         ----------------  ----------------
          Net cash (used in) provided by operating activities                    (13,280)         (316,287)
                                                                         ----------------  ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of treasury stock                                                        -            (7,000)
  Purchases of property and equipment                                                  -            (8,181)
                                                                         ----------------  ----------------
          Net cash (used in) provided by investing activities                          -           (15,181)
                                                                         ----------------  ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from investor participation                                                 -            78,766
  Principal payments on capital lease obligations                                 (2,003)                -
  Receipt of cash on acquisition                                                       -            25,000
  Debenture                                                                            -            70,000
                                                                         ----------------------------------
          Net cash  provided by (used in) financing activities                    (2,003)          173,766
                                                                         ----------------  ----------------

INCREASE (DECREASE) IN CASH                                                      (15,283)         (157,702)
                                                                                       -
CASH, BEGINNING OF PERIOD                                                         51,676           274,715
                                                                         ----------------  ----------------

CASH, END OF PERIOD                                                      $        36,393   $       117,013
                                                                         ================  ================


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         Income tax paid                                                 $             -   $         1,600
                                                                         ================  ================
         Interest paid                                                   $             -   $       118,000
                                                                         ================  ================

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
       Common stock options issued for services                          $             -   $             -
                                                                         ================  ================
       Common stock issued for compensation                              $             -   $             -
                                                                         ================  ================
      Accrued interest added to bankruptcy liabilities                   $       940,728   $             -
                                                                         ================  ================
</TABLE>




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

                                       4
<PAGE>




LITFUNDING CORP.
(Debtor-in-Possession)

Notes to Consolidated Financial Statements for the THREE MONTH PERIODS Ended
MARCH 31, 2004 and 2003 (UNAUDITED)

ORGANIZATION AND BASIS OF PRESENTATION
LitFunding Corp. ("The Company") was incorporated in the state of Nevada. The
Company serves as a holding company for its wholly owned subsidiary, California
LitFunding ("California LitFunding") (together the Company and California
LitFunding are referred to herein as the "LitFunding Companies"), which is the
entity for which all operations are conducted. It owns substantially all of
operating assets, it employs all of the personnel, and it pays the obligations
of both corporations. Additionally there are two inactive subsidiaries.
E.Evolution Expeditions,Inc was formed February 5, 2000 and Litfunding USA was
formed March 22, 2004. The Company intends to conduct future operations of the
reorganized entity through Litfunding USA.

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

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

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

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


                                       5
<PAGE>

The Company incurred material net losses for the three months ended March 31,
2004 and liabilities exceeded assets by approximately $17,002,000 at March 31,
2004. As discussed in Note 3, the Company has entered into a Chapter 11 Plan of
Reorganization under the United States Bankruptcy Code. The ability of the
Company to continue as a going concern is dependent upon successful confirmation
and operation under the bankruptcy plan, obtaining additional capital and
financing, and generating positive cash flow from operations. The Company
intends to seek additional capital either through debt or equity offerings and
believes that increased volume and reduction in its lead time to finance and
collect on funded cases will ultimately lead to profitability and positive cash
flows. The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

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
March 31, 2004, cash deposits did not exceeded those insured limits.

The statement of cash flows for the period ended March 31, 2004, includes an
increase in accounts payable and accrued expenses of $85,500 related to
professional fees associated with the Reorganization. The Company had
expenditures of $54,500 related to the Reorganization professional fees during
the three month period ended March 31, 2004.

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

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is recorded on a straight-line basis over a period of the shorter
of the applicable lease term or the estimated useful lives of the assets ranging
from 3 to 5 years. Depreciation expense for the three months ended March 31,
2004 and 2003 was $7,830 and $6,637, respectively.

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

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

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


                                       6
<PAGE>

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 N.123

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

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

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

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

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

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


                                       7
<PAGE>


BANKRUPTCY PETITION AND REORGANIZATION

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

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

     In February of 2004, the litigation relating to the involuntary petition
was settled. The settlement reached by and among the Company and the petitioning
creditors has been incorporated into a reorganization plan scheduled for and
subsequently confirmed at a court hearing on May 26, 2004 and will become
effective after the bankruptcy Judge enters that order. That order is expected
to be entered within the last two weeks of June 2004.

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

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


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

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

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


                                       8
<PAGE>

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

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

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

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

         The Plan presented to the court and ruled in favor of on May 26, 2004
incorporates both a business plan, and a legal framework for the payment of
claims. The business plan sets forth how the Company intends to generate the
funds necessary to meet the monetary obligations fixed in the Plan. The legal
framework details what each class of creditors will receive under the terms of
the Plan.

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

The Company intends to repay all obligations in full. However, the Company
intends to reject a capital lease and an operating lease. Claims are impaired as
that termed is used in the Bankruptcy Code because obligations will be paid out
over specified long term periods different from the original terms of the
agreements. However, for accounting purposes, the Company does not believe any
of the obligations are compromised at March 31, 2004, based on the expected
amount of allowed claims.

ACCOUNTS RECEIVABLE AND CONTINGENT ADVANCES

Accounts receivable represents unpaid amounts due for the return on contingent
advances and fees earned on cases in which there have been positive resolutions.
Allowances for bad debts amounted to $633,921 as of March 31, 2004.

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

Management estimates the net realizable value of contingent advances by
periodically reviewing the progress of the cases with the attorneys trying them
and past experience with similar cases. Management believes that the Company has
historically achieved a success rate of approximately 85% on cases that it has
funded. Management monitors all cases and provides an allowance if it believes
that any advances have been impaired. At March 31, 2004, there were contingent
advances outstanding of $11,750,300 and a corresponding impairment allowance of
$2,937,574.



                                       9
<PAGE>

INVESTOR PARTICIPATION OBLIGATIONS

The Company raised capital to enable it to engage in the practice of funding the
contingent advances by entering into so called IEP agreements. These are
considered to be investment/equity participation agreements the nature of which
has been redefined and fixed as part of plan of reorganization and the totality
of all claims held by the IEP petitioning creditors has been incorporated into
the Plan Note. The Plan Note will have an opening balance of $26,111,763 as of
May 1, 2004 and as of May 1, 2004 include an approximate $2,000,000 from the
cancelled sale of stock and a predetermined retroactive return. These IEP's
accrue interest at 20% per annum. Under the anticipated bankruptcy plan these
obligations are to be repaid to the extent the Company successfully collects
funds from accounts receivable and contingent advances. There is no specific
schedule of repayment but the Company anticipates collections to be adequate to
fully repay the IEP Note.


DEBENTURES

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

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


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 three months ended March 31, 2004, the Company granted 850,000 stock
options to officers and employees. The exercise price of these options is $0.10
per share, they vest immediately and expire in three years.


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 periods ended March 31, 2004 and 2003 consisted
of the following:

                                             2004             2003
                                             ----             ----
Current tax (benefit) provision            $  (698,000)      $ (195,600)
Deferred tax (benefit) provision               698,000          194,000
                                         -------------- -----------------
Total income tax provision                 $      - 0-       $    1,600
                                         ============== =================



                                       10
<PAGE>

COMMITMENTS AND CONTINGENCIES

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

The Company is involved in a suit for breach of contract, fraud, conspiracy and
defamation. The claimants allege that there was a finder's fee agreement between
them and the founding officers/shareholders for the Company. The Company's
position is that there was a negotiated agreement with the claimants. The
claimants allege damages of $16 million. A hearing on an objection to this claim
was heard on May 24, 2004 and the claimants' allegations were rejected in their
entirety by the court.

The Company believes that all alleged claims must be settled through the
bankruptcy court.

The Company has rejected the operating and capital leases through the bankruptcy
proceeding.

The Company does not anticipate material changes in the carrying value of its
assets and liabilities as a result of he bankruptcy proceeding. However, there
may be changes as disputed claims are resolved and the Plan is confirmed.

NET LOSS PER SHARE

Net loss per share is calculated using the weighted average number of shares of
common stock outstanding during the period. Warrants to purchase 876,000 shares
of common stock and options to purchase 2,399,500 common shares were not
considered in the calculation for diluted earnings per share for the three month
period ended March 31, 2004 because the effect of their inclusion would be
anti-dilutive. A summary of the net loss per share calculation for the three
month periods ended March 31 is presented below:
<TABLE>
<CAPTION>
                                                2004                        2003
                                  --------------- ------------- --------- --------------- ----------- ---------
                                   Income (Loss)      Shares      Per       Income (Loss)   Shares      Per
                                                                 share                                 share
                                  --------------- ------------- --------- --------------- ----------- ---------
<S>                                    <C>              <C>        <C>          <C>            <C>       <C>
Net (Loss) Income                  $(1,916,318)                            $(1,766,207)
Preferred stock dividends              (-0-)                                   (-0-)

BASIC EARNINGS PER SHARE

Loss available to common
stockholders                       $(1,916,318)    9,410,850    $(0.20)    $(1,766,207)     6,380542  $(0.28)

Effect of dilutive securities          N/A                                                              N/A


DILUTED EARNINGS PER SHARE         $(1,916,318)      9,410,850  $(0.20)    $(1,766,207)     6,380542  $(0.28)
</TABLE>


CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at banks in California. Accounts are insured
by the Federal Deposit Insurance Corporation up to $100,000. At times, the
Company's cash balances may exceed insured limits. However, March 31, 2004, none
of the Company's deposits exceeded insured limits.

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


                                       11
<PAGE>

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
March 31, 2004 is comprised of numerous debtors. However, one debtor represents
approximately 45% of the total balance at March 31, 2004. No other single note
or debtor comprises greater than 10% of the total balance at March 31, 2004.

13.      SUBSEQUENT EVENTS

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

           In February of 2004, this litigation was settled. The settlement
reached by and among the Company and the petitioning creditors has been
incorporated into a reorganization plan confirmed at a court hearing on May 26,
2004. That confirmation will become effective after the bankruptcy Judge has
entered the order related to that ruling. The entry of that order is expected
within the last two weeks of June 2004. Pursuant to the Settlement Agreement
entered into by and between the Company and the IEP petitioning creditors, each
and every claim held by the IEP petitioning creditors has been fixed in the
Plan. The totality of all claims held by the IEP petitioning creditors has been
incorporated into the Plan Note. The Plan Note will have an opening balance of
$26,111,763.00 as of May 1, 2004.












                                       12
<PAGE>





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.

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 March 31, 2004.

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


                                       13
<PAGE>

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

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

As a result of the merger transaction with us, the former LitFunding I
stockholders obtained control of our voting stock. For financial accounting
purposes, the acquisition was treated as a reverse acquisition 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 their
having acquired us on January 23, 2003. 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) our preexisting outstanding shares (the accounting acquiree) are reflected
at their net asset value as if issued on January 23, 2003. We also own two other
dormant subsidiaries besides California LitFunding. E.Evolution Expeditions, a
Nevada company was previously formed on February 25, 2000 by RP Entertainment
(now LitFunding Corp. discussed above). LitFunding USA was formed on March 22,
2004 expressly for the purpose of restarting business.

On April 2, 2003 certain individuals and entities filed an involuntary
bankruptcy petition against us in the United States Bankruptcy Court, Central
District of California. After numerous legal proceedings, in November 2003, we
stipulated to the entry of an order for relief, thereby placing us into a
Chapter 11 proceeding. In January 2004, our wholly owned operating subsidiary,
California LitFunding, filed a voluntary Chapter 11 bankruptcy petition. In
February of 2004, an order was entered substantively consolidating our Chapter
11 estate with the Chapter 11 estate of California LitFunding. However, this
order did not effectuate a merger between these two corporate entities. On May
26, 2004 the bankruptcy court ruled in favor of our plan of reorganization and
we expect that order to be entered no later than June 30, 2004. (see Note 3).

We incurred material net losses for the three months ended March 31, 2004 and
liabilities exceed assets by $17,002,313 at March 31, 2004. As discussed in Note
3, we have entered into a Chapter 11 Plan of Reorganization under the United
States Bankruptcy Code. Our ability to continue as a going concern is dependent
upon successful confirmation and operation under the bankruptcy plan, obtaining
additional capital and financing, and generating positive cash flow from
operations. We intend to seek additional capital either through debt or equity
offerings and believe that increased volume and reduction in our 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 we be
unable to continue as a going concern.

In February 2004, we entered into a settlement agreement with the petitioning
creditors. The terms of this settlement are currently incorporated and made a
part of, our Joint Chapter 11 Plan of Reorganization and a confirmation hearing
for that plan was held on May 26, 2004. At that hearing the bankruptcy court
ruled in favor of that reorganization plan and we are waiting for the Judge to
enter that order no later than June 30, 2004. The Settlement Agreement provides,
among other things, for the dismissal of all litigation between the parties
promptly after the confirmation of the reorganization Plan. This resolution will
bring to a close of over thirteen months of acrimonious, debilitating and
expensive litigation between the parties and will allow us to restart the
business which was effectively stalled and damaged by the litigation. An
integral part of our prospective business plan involves raising additional funds
for investment in lawsuits. Since different segments of the capital markets may
desire different investment structures and investment vehicles, we cannot
predict exactly how funds will be invested with us after the effective date of
the reorganization plan in each instance. Initially, we anticipate that the new
funding will be obtained from private parties and investment groups, and that


                                       14
<PAGE>

this funding will be in the form of loans. We expect to restart the business
using LitFunding USA, a new subsidiary formed in February of 2004 specifically
for this purpose. It is anticipated that the financing party will be granted a
first priority lien on all of the lawsuits that they invest in. Once the
obligations owed to the capital source are satisfied, LitFunding USA will
receive the balance of the distributions.

LIQUIDITY AND CAPITAL RESOURCES.

Our principal capital requirements during the year 2004 are to fund the internal
operations, defend ourselves from the litigation described in Part II, Item 1,
below and fund the restart of the business subsequent to the confirmation of the
reorganization plan. 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 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.

FOR THE THREE MONTHS ENDED MARCH 31, 2004.

RESULTS OF OPERATIONS.

As shown in the accompanying financial statements, we had gross revenues of $
531,190 and incurred a net loss of $ 1,916,318 for the three months ended March
31, 2004 as compared to gross revenues of $ 162,495 and a net loss of $
1,766,207 for the same period in 2003. Because of the bankruptcy proceedings, we
have curtailed our marketing activities. 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 on cases.
Additionally, in accordance with GAAP, our total liabilities exceeded our total
assets by $ 17,002,313 at March 31, 2004. In the ordinary course of events, this
would raise substantial doubt about our ability to continue as a going concern.
However, we believe that it is important to note that we recognize revenue from
advances only when a case has been resolved and when we are reasonably confident
that fees calculated will in fact be realized. As of the three months ended
March 31, 2004, if we made no further advances to plaintiffs or their attorneys,
our management estimates that we can reasonably expect to collect approximately
$30 to 36 million in fees and return of principal over the next 12-24 months
from open cases. The estimate is based on historical performance and other
factors affecting each case. The litigation that resulted in the filings under
the chapter 11 statutes has directly affected our ability to collect on
receivables primarily because some clients felt emboldened by the overarching
threat of dissolution during that time to challenge their obligations to pay
amounts due to us. Some felt that it would be advantageous to try negotiate with
a trustee to pay pennies on the dollar if anything at all. This has resulted in
the filing of numerous law suits in the Federal bankruptcy court. These are
being aggressively pursued as we go about the task of restarting operations.


OPERATING EXPENSES:

OPERATING ACTIVITIES: During the three months ended March 31, 2004, net cash
used in operating activities decreased to $ 13,280 compared to net cash used in
operating activities of $ 316,287 during the same period in 2003. The decrease
in net cash used from operating activities resulted primarily because there were
no funds set aside for advances to plaintiffs and their attorneys as we devoted
our energy and resources to defending ourselves against the involuntary
bankruptcy petition filed against us on April 2, 2003 and subsequent intensive
related litigation. Expenses related to the reorganization accumulated to
$170,000 for the three month period ended March 31, 2004. Other factors include
the positive cash flow from resulting from increased reliance on accounts
payable of $ 255,102 at March 31, 2004 as compared to a decreased reliance on
accounts payable of $ 59,970 in the same period last year.

OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS. We have generated $ 531,190 in
revenues from operations for the three month period ended March 31, 2004. To
effectuate our business plan during the next twelve months, we must restart the
marketing of our products and increase 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. Concurrently, we will be moving operations to the State of
Nevada no later than December 31, 2004 to take advantage of the prevailing tax
structure, business climate and commercial lending laws in that state.
Additionally, we intend to start marketing our new full recourse loan product in
the third quarter of 2004. That product which we anticipate will eventually
become about 50% 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.


                                       15
<PAGE>

We have cash of $36,393 as of March 31, 2004. In the opinion of management,
available funds will not satisfy our working capital requirements for the next
twelve months. Nevertheless, our reorganization plan does provide 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 and institution or other equity
offerings. We may attempt to secure other loans from lending institutions or
other sources. 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.

We do not anticipate that we will purchase or sell any significant equipment but
we may enter into long or medium term leases as a prerequisite to moving
operations to the State of 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.

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,
2004, 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
thirteen months we and the Petitioning Creditors engaged in litigation regarding
the merits of the involuntary petition, and the Petitioning Creditors' rights
under disputed contracts.

Pursuant to the terms of a stipulation with the Petitioning Creditors, we
entered Chapter 11 effective November 19, 2003. The costs of litigating the
merits of the Involuntary Petition, and the financial impact of the pending
involuntary, so materially damaged both us 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.

We are the defendant in several matters in litigation, many of which are in the
normal course of our business, including litigation for refunds of funds
invested. Apart from the litigation we instituted against recalcitrant clients
that felt they need not live up to their obligations, we believe these suits are
without merit and intend to defend these litigations in courts of law.

We are involved in a suit for breach of contract, fraud, conspiracy and
defamation. The claimants allege that there was a finder's fee agreement between
them and our founding officers/shareholders . Our position was that there was a
negotiated agreement with the claimants. The claimants alleged damages of $16
million. The bankruptcy court heard our objection to this claim on May 24, 2004
and the claimants' allegations were rejected in their entirety by the court.


                                       16
<PAGE>

We believe that all alleged claims must be settled through the bankruptcy court.

We have rejected the operating and capital leases through the bankruptcy
proceeding.

In February of 2004, the litigation relating to the involuntary petition was
settled. The settlement reached by and among us and the petitioning creditors
has been incorporated into a reorganization plan heard on May 26, 2004. At that
hearing, the court ruled in favor of the reorganization plan and we are waiting
for that order to be entered by the bankruptcy Judge. We expect that order to be
entered no later than June 30, 2004.

California Litfunding, as the operating entity, holds title to substantially all
of the assets of the LitFunding Companies. The core assets within California
Litfunding, and those with most of the value, are the Settlement Agreements. A
total of approximately $18.6 million dollars was invested through the Settlement
Agreements. Of this total, approximately $7.0 million dollars in principal has
been recovered, $3.2 million dollars in "fees" have been paid, and $1.6 million
dollars in losses have been suffered, leaving a principal balance owing of
approximately $12 million dollars.

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

Our primary liabilities are summarized in the following paragraphs:

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

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

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

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

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

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


                                       17
<PAGE>

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

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

We intend to repay all obligations in full. Claims are impaired as that termed
is used in the Bankruptcy Code because obligations will be paid out over
specified long term periods. However, for accounting purposes, we do not believe
any of the obligations are compromised at March 31, 2004, based on the expected
amount of allowed claims.

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

In February of 2004, this litigation was settled. The settlement reached by and
among the Company and the petitioning creditors has been incorporated into a
reorganization plan heard and approved May 26, 2004. That order is expected to
be entered before June 30, 2004. Pursuant to the Settlement Agreement entered
into by and between the Company and the IEP petitioning creditors, each and
every claim held by the IEP petitioning creditors has been fixed in the Plan.
The totality of all claims held by the IEP petitioning creditors has been
incorporated into the Plan Note. The Plan Note will have an opening balance of
$26,111,763.00 as of May 1, 2004.

We do not anticipate material changes in the carrying value of its assets and
liabilities as a result of the bankruptcy proceeding. However, there may be
changes as disputed claims are resolved and the Plan is confirmed.

ITEM 2. CHANGES IN SECURITIES.
-----------------------------

There have been no changes in securities

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

There has not been a submission of matters to vote of security holders

ITEM 5.  OTHER INFORMATION
---------------------------

We have moved our corporate headquarters to 5455 Wilshire Blvd., Suite 2123, Los
Angeles, CA 90036 as a prelude to a final move to new premises in Las Vegas,
Nevada. The location of those future premises has yet to be determined.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

(a) Exhibits.

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

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

         32.1 Section 1350 Certification by Chief Executive Officer

         32.2 Section 1350 Certification by Chief Financial Officer


                                       18
<PAGE>

(b) Reports on Form 8-K.

The following reports were filed during the three months ended March 31, 2004

      1.   On February 9, 2004, we filed an amended report on Form 8-K,
           containing information under Item 3, Bankruptcy, regarding
           developments in our bankruptcy proceedings, including the filing on
           January 31, 2004, of a Joint Plan of Reorganization, which provides
           for the payment of all valid claims in full, or in accordance with
           the contractual rights of the claimants and provides for the
           preservation of our right to seek restitution for damages suffered by
           the bad faith filing of the Involuntary Petition.

      2.   On March 15, 2004 we filed a report on Form 8-K to report that on
           February 26, 2004, we entered into a settlement agreement with the
           petitioning creditors that provides for the dismissal of all
           litigation between the parties promptly after the confirmation of the
           Reorganization Plan. This resolution will bring to a close of over
           eleven months of litigation between the parties. Details are
           contained in the report on that Form 8-K. In addition, this report
           also contained Item 6 regarding the resignation of one of our
           directors, Michael Marcelli, which was not the result of any
           disagreement with us.

     3.    On April 1, 2004 we filed a Report on Form 8-K containing Item 4
           regarding the change in our accountant on March 26, 2004, the date on
           which we dismissed our independent auditors Kabani & Company, Inc.,
           CPA
     4.    Subsequent to the period covered by this report, on April 1, 2004 we
           filed a report on Form 8-K containing Item 5, Other Events, reporting
           our anticipated difficulty in filing our annual report due to our
           change in auditors, reported above. We also included information
           clarifying our Federal Tax ID number.




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<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.



September 15, 2004                By:     /s/ Morton Reed
                                          -------------------------------------
                                          Morton Reed, President and
                                          Chief Executive Officer